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Cash corn price reaches fresh high

02/18/2011 @ 9:32am

Demand continues to look strong for corn after cash prices for the grain followed futures to 31-month highs.

National cash price indexes maintained at the Minneapolis Grain Exchange last closed at $6.72 a bushel for corn, reflecting an average basis of 40 3/4 cents to the settlement of the nearby Chicago Board of Trade March corn futures contract. Basis is the difference between cash prices and futures.

Cash prices and futures surged Thursday as strong export demand fueled a turnaround from losses earlier in the week. The markets have climbed in an attempt to slow demand and entice farmers to sow additional acres this spring to replenish tight supplies.

Yet, the U.S. Department of Agriculture reported more export business Friday. It said private exporters had struck deals to sell 156,100 tons of corn to Mexico, which suffered crop losses from a recent freeze and accounted for 60% of weekly corn export sales for delivery in the current marketing year.

The usage of corn from the last harvest, known as the old crop, "continues at an unsustainable pace, leaving world's largest grain crop the undisputed price leader," said Rich Feltes, vice president of research for commodity brokerage RJ O'Brien.

Tight supplies are a concern as corn is competing for acreage with soybeans and cotton, which reached a record high Thursday. Soybeans and cotton have rallied on supply fears and strong demand from China.

Cotton "boasts superior returns" over corn and soybeans to growers in the U.S. Delta and western Texas, Feltes said. The crops will be sown this spring.

National cash prices for soybeans last closed at $13.43 1/4 a bushel (-61 1/4 cents, basis CBOT March soybeans), according to the indexes maintained at the Minneapolis Grain Exchange. Domestic cash prices averaged $7.80 3/4 for soft red winter wheat (-70 cents, basis CBOT March wheat); $9.92 1/4 for hard red spring wheat (+11 1/4 cents, basis MGE March wheat); and $8.41 1/2 for hard red winter wheat (-$1.11 3/4, basis Kansas City Board of Trade March wheat).

Crop Weather

The central U.S. remained dry and warmer than normal Friday, but cold conditions were heading into the Northern Plains, private forecaster Telvent DTN said. Showers are likely Saturday night in Nebraska and western Iowa before the rain system move northward and eastward Sunday, the firm said.

Snow could follow the rain over an area from South Dakota to Michigan, with moisture totals ranging from 1/10 inch to one inch of liquid. Precipitation for the rest of the central U.S. will be minimal for the weekend, according to Telvent.

The firm's five-day precipitation map has the heaviest coverage for the central U.S. in the east-central Midwest. Eastern Iowa, northern Illinois and northern Indiana will accumulate up to three-quarters of an inch, Telvent said. Dry wheat areas in the southwestern Plains will stay mostly dry.

-By Tom Polansek, Dow Jones Newswires; 312-341-5780; tom.polansek@dowjones.com

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