Corn Rises to Highest in Almost Six Weeks in Chicago on U.S. Ethanol Usage

Corn advanced for a fourth day to near a six-week high on speculation that demand will climb on rising ethanol usage in the U.S. and increased purchases by China. Soybeans and wheat were little changed.

The March-delivery contract rose as much as 0.5 percent to $6.0250 a bushel in Chicago and traded at $6.0225 by 4:22 p.m. Tokyo time. The contract reached $6.04 yesterday, the highest price since Nov. 9.

“Fundamentally, the grain is still strong on increasing use to produce ethanol and prospects for demand from China,” said Hiroyuki Kikukawa, the general manager of research at IDO Securities Co. in Tokyo.

Soybeans for March delivery were little changed at $13.2625 a bushel after trading as low as $13.23 earlier. The price rose as much as 1.5 percent yesterday to $13.295, the highest level since Nov. 12.

Congress last week passed an $858 billion tax-cut plan that includes incentives to help buoy demand for fuel made from crops. A $1-a-gallon incentive for biodiesel made from vegetable oils, which expired last year, will be extended for one year. U.S. ethanol output reached a record 939,000 barrels a day in the week ended Dec. 3, government data show.

The gains in corn and soybeans would be limited as higher prices may encourage U.S. farmers to sell the crops from stockpiles and investors to unwind their bets on a price rise before the Christmas holiday, said Toshimitsu Kawanabe, an analyst at commodity broker Central Shoji Co.

The spot-basis bid, or premium, for corn delivered in December at Gulf of Mexico ports fell yesterday to 46 cents to 50 cents a bushel above March futures, compared with 49 cents on Dec. 17, U.S. Department of Agriculture data show. The premium for soybeans narrowed to 74 cents to 78 cents a bushel over January futures, from 74 cents to 82 cents on Dec. 17.

Wheat for March delivery lost as much as 0.6 percent to $7.65 a bushel and last traded at $7.6875. The price gained as much as 2.6 percent yesterday.

National Australia Bank Ltd. estimated that “roughly half” of Australia’s 24 million metric ton wheat crop will be feed or downgraded quality this season. The cost of the overall downgrade may approach A$1 billion ($996 million), with losses from flooding still unclear at this stage, the bank said today.

South Korea will temporarily remove an import tariff on milling-wheat shipments from Jan. 1 to help “stabilize” local prices, the nation’s finance ministry said. A tariff on flour will also be cut to 2.5 percent from 4.2 percent and the moves will be effective until the end of June, the ministry said in an e-mailed statement today.

source: bloomberg