Bird flu fears to weigh on corn market, analysts say
As more than 30 different countries report cases of the deadly strain of bird flu, traders at the Chicago Board of Trade watch for pressure on the corn market, analysts said on Wednesday.
On Wednesday, CBOT May corn lost 4 cents to $2.34 3/4 a bushel, and March was down 3 3/4 cents to $2.24 1/4. The lower corn market was a carryover from a lower soybean market hit by bird flu fears.
The Asian-borne disease known to kill infected birds and some humans has been reported in European, African, and Middle Eastern countries. On Wednesday, Bahama officials were testing dead flamingos for bird flu.
Global poultry consumption in 2006, currently estimated at 81.8 million tons, is nearly 3 million tons lower than the previous 2006 estimate of 84.6 million tons, according to the Food and Agriculture Organization of the United Nations (FAO).
With the reduction of world poultry production, less corn and soy meal usage is putting a cloud over the U.S. corn market. Don Roose, U.S. Commodities, said the bird flu is a big potential negative for the corn market.
"Every three pounds of grain is used to produce one pound of poultry. So, you start to subtract poultry numbers around the world, you start to see what happens with corn and soybean demand," Roose said.
In the U.S., export prices for broiler cuts, after rising to record levels in October, dropped 13% as a result of declining shipments to eastern Europe and central Asia in November and December, according to FAO statistics.
From a total corn consumption standpoint, the U.S. is watching the corn buying habits of Japan and Mexico, its biggest corn markets.
When asked, Roose said the bird flu disease doesn't have to be found in the U.S. for the corn market to be pressured. "When you look at the disease spreading through migrating birds, it would be surprising to see the U.S. isolated. But, market pressure occurs without the disease in the U.S.," Roose said.
Sid Love, Kropf & Love Consulting Services LLC, said some U.S. poultry companies have already reported lower profits due to lower poultry demand around the world.
Meanwhile, analysts say weather and the USDA March Planting Intentions report at the end of the month will have market impact.
With higher input costs, the talk has focused on a switch to more soybean acres. Love said corn prices might make a difference. "With CBOT December corn reaching almost $2.70 per bushel, maybe it has changed some minds."
Roose said that if the USDA planting report offers any surprise it will show more corn acres than the trade thinks. "In the last few years, the profitability has been there with corn," Roose said. "With the big LDP's, it's been a windfall for the producer to plant corn compared to any other crop."
Long term, Roose said weather could be the major factor for the corn market. "If the weather is normal for the U.S. and for China's corn production, I think you run into a bearish tone," Roose said.