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$8 corn draws attention

04/05/2011 @ 7:12am

SINGAPORE (Dow Jones)--Corn futures on the Chicago Board of Trade may rise to $8 a bushel in the next three months due to robust demand for animal feed and ethanol amid tight supply, Colin O'Shea, head of commodities at Hermes Fund Managers Ltd., said Tuesday.

Adverse weather conditions in U.S. growing regions may also support corn prices, O'Shea said. If wet weather continues, corn planting may be affected and some farmers may switch to planting crops such as soybeans instead, which would offer further support to corn prices, he said.

July corn futures on CBOT are currently trading around $7.68 a bushel.

Hermes, which manages over US$2 billion of assets under management for institutional investors, maintains a favourable view on agricultural commodities, particularly corn and crude oil, O'Shea said.

Many investors are raising commodities allocations in investment portfolios to diversify and hedge against inflationary pressures, he said, suggesting that some who were earlier allocating 3%-4% of the portfolio to commodities are likely to raise those allocations to 10%-15% this year.

Crude oil futures on the New Mercantile Exchange may rise to $150 a barrel in the next three months if political tensions in the Middle East and North Africa escalate or if spare production capacity in Saudi Arabia is adversely affected, he said.

-By Surabhi Choudhary, Dow Jones Newswires; +65 6415 4086 surabhi.choudhary@dowjones.com

(END) Dow Jones Newswires

April 05, 2011 03:53 ET (07:53 GMT)

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