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Strong basis helps corn rally Friday

05/04/2012 @ 4:06pm

Front-month U.S. corn futures closed higher on strong cash-basis levels Friday, while deferred contracts fell amid a good start to the country's growing season.

Chicago Board of Trade May corn ended up 11 1/2 cents, or 1.8%, at $6.62 1/4 a bushel. July corn, the most actively traded contract, rose 5 3/4 cents to $6.20 1/4 a bushel, while December corn fell 5 1/4 cents to $5.24 1/4 a bushel.

Nearby contracts rose despite substantial pressure from outside markets, highlighting the strength of concerns about tight current supplies.

Strength in cash markets Friday suggested strong export demand. In the early afternoon in the Louisiana Gulf region, the price of physical corn for export was 83 cents to $1.02 above July futures, the U.S. Department of Agriculture said.

"The primary thing to think about is the Gulf basis trading at over a dollar above the July board," said Bill Gentry, analyst for Risk Management Commodities, a brokerage in Indiana. "That's pretty significant."

Basis is the difference between cash and futures prices.

Also reflecting strong export demand, the USDA followed huge weekly sales reported Thursday with new sales announcements Friday. The USDA reported sales of 116,000 metric tons to South Korea, and 240,000 metric tons of optional-origin corn to Mexico. Both sales were for the 2012-2013 marketing year.

Deferred corn fell since analysts expect a large U.S. crop this year. Private analytical firm Informa Economics pegged U.S. 2012 corn plantings at 96.124 million acres, up from its March figure of 95.5 million and above the USDA's March 30 forecast of 95.864 million, trade sources said Friday.

Planting progress is also well ahead of schedule, which could lead to higher yields and new supplies being harvested earlier than usual.

Still, analysts say a large U.S. crop will be key to replenishing global stockpiles, so any signs that the crop could be smaller than expected could help boost prices again.

Separately, wheat futures fell Friday on pressure from outside markets and expectations for a large harvest of U.S. winter wheat. The Kansas winter wheat crop is likely to yield 49.1 bushels an acre, results from an annual crop tour showed Thursday. The tour's average estimate over the past three years was 39.6 bushels an acre. Tour participants said the crop looked better than average.

CBOT May wheat fell 4 1/2 cents to $6.03 3/4 a bushel. Kansas City Board of Trade May wheat fell 7 cents to $6.13 3/4, and MGEX May wheat fell 3 cents to $7.40.

Soybean futures rose, recovering from losses earlier in the week as analysts continue to expect tighter supplies amid growing demand.

CBOT May soybeans rose 6 1/4 cents to $14.75 a bushel.

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