US maize market set to drift over Christmas

By Joanna Newman

WITH trading volumes evaporating for the holiday period, most market players expect prices to remain stagnant or drift lower over the rest of the month.

The Chicago March futures contract settled yesterday (22 December) at 219.0¢/bushel, after inching down from 220.75¢/bushel late last week.

Forecasts of freezing weather conditions in the USA have raised hopes that livestock producers will have to feed more maize to their cattle, thereby boosting domestic demand.

But the latest Cattle on Feed report suggests that there are fewer head in the nations feedlots consuming grain rations. The number of cattle placed in feedlots during November for fattening up totalled 2.05 million, down 7% from a year ago.

Meanwhile exports are running at better-than-expected levels and this has helped to stabilise prices. In the week ending 17 December, export inspections of maize totalled 50.1 million bushels, well ahead of estimates of 30-35 million bushels.

This has been the third bad year in a row for Americas beleaguered maize farmers.

After halving from around 550¢/bushel in mid-1996 to 275¢/bushel at the start of 1998, prices dropped again during the first eight months of this year to 200¢/bushel in August, a 25% fall. Since then, the market has recovered slightly to approximately 225¢/bushel, but are still well down on the year.

The US maize market has been hit by the twin impact of the economic crises in major export markets such as Asia and Russia and massive oversupply at home. Thanks to El Niño, the USA achieved its second highest yield on record this year, 133 bushels/acre, and its second highest crop ever.

The maize crop is estimated at 9.8 billion bushels, up 5% from 1997. US maize farmers have received $325 million in Loan Deficiency Payment (LDP) subsidies from the federal government, but much of the 1998 harvest still remains unsold.

This overhang of inventory will keep prices depressed into the New Year, many analysts warn.