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Corn may rise as demand seen cutting reserves to 29-year low

Corn prices in Chicago may rise for a sixth straight session, extending a 10-year high, as livestock, poultry and milk producers, ethanol makers and investors increase their long positions.

Corn prices have surged 15% since January 10 when Keith Collins, the chief economist for the US Department of Agriculture, said demand for corn to make ethanol will surge 46% in the year starting Sept. 1 from a record 2.15 billion bushels in the current year. The government said January 12 that global supplies on October 1 will be the lowest since 1978. „The USDA reports last week have changed the landscape to one of much tighter supplies,” said Robert Lekberg, a market analyst for Goldenberg Hehmeyer & Co. in Chicago. „There is coverage yet to be bought by end-users.” Corn futures for March delivery rose 7.5 cents, or 1.8%, to $4.155 a bushel before the start of floor trading on the Chicago Board of Trade.

Yesterday prices rose to $4.205 in intraday trading, the most ever for the March futures and the highest for the most-active contract since July 1996. Soybean prices may rise to stay competitive with corn ahead of the spring planting season in the US Midwest, which begins in March. Reduced inventories and rising demand may boost US corn plantings by as much as 10 million acres, mostly at the expense of soybeans, Lekberg said. Soybean futures for March delivery rose 7.5 cents, or 1%, to $7.295 a bushel overnight in electronic trading in Chicago. Before today, prices had risen 3.6% this month, reaching an 18-month closing high yesterday. Prices rose 14% last year on speculation that increased returns from growing corn will cut global plantings of soybeans.
Wheat futures may follow corn higher as the two grains could compete for acres when corn planting starts in March.

Corn prices have nearly doubled in the past year on increased demand for ethanol. With prices that high, many growers may plant corn on acres where they'd otherwise seed wheat. Wheat prices are up 50% in the past year after drought hurt crops in several growing countries including the US and Australia, which caused some growers to increase acreage. „It's a competition for acres,” said Darrell Holaday, president of Advanced Market Concepts, an agriculture analyst in Manhattan, Kansas. „The acres issue is driving the market.” Wheat futures for March delivery rose 6 cents, or 1.3%, to $4.83 a bushel in overnight trading in Chicago. Prices rose 48% last year, the most since 1991, reaching a 10-year high of $5.57 in October. A futures contract is an obligation to buy or sell a commodity at a set price for delivery by a specific date. (Bloomberg)