Welcome news for US maize market

By Joanna Levin

A barrage of good news has helped lift maize prices sharply over the past few trading days. The Chicago December futures contract gained 8 cents/bushel on Tuesday 13 October to close at 228 cents/bushel, up 8 percent from the close of 210.25 cents/bushel a week ago.

Traders were reacting to news that the USDA is planning food aid to Russia, which could help shift some of the nations maize surplus. Meanwhile, the federal government has announced $1.3 billion in payments to US farmers under the Conservation Reserve Program (CRP) and may be extending the programme to encourage farmers to set aside more arable land for conservation.

This would help reduce the size of future corn harvests. Subsidies to farmers under the Loan Deficiency Payment (LDP) programme may be increased and this would support market prices for maize. These reports are hitting the market in good time for the November elections.

Other good news came out this week. The ending stocks of US maize for the 1998/99 season have been revised downwards to 1.711bn bushels from a previous estimate of 1.922bn bushels, according to the monthly supply and demand report released by the US Department of Agriculture.

While traders and producers welcomed the news, they cautioned that this still represents a sizeable jump in US stocks from the 1997/98 season, which ended with carryover inventory of 1.308bn bushels. The biggest reasons for the increase are a jump in the crop yield from 127 bushels/acre last year to 132 bushels this year thanks to favourable weather and the failure to absorb the high inventories left over from last years crop.

Despite some weather-related delays early last week, American farmers are well ahead with their corn harvest with 31% of the crop already gathered. This compares with a five-year average at this point in the season of just 16%.