Corn prices may still be too low to reflect "critically tight" supplies in the US despite their rally of 80% from a late-June low, the Canadian Wheat Board has said, as analysts fuelled expectations over Chinese imports.

The board, which controls wheat exports from Canada's western agricultural heartland, warned that corn prices "may not truly represent the US supply and demand balance", sapped by disappointing production and what has, so far, proved a resilient level of orders.

"Domestic demand is solid, and it remains to be seen how much the price has rationed offshore demand," the board said.

Unless rates of consumption fell, corn prices "are expected to appreciate in the first quarter of 2011".

Prices, which, for Chicago's spot contract, currently March, have soared from $3.25 a bushel in late June to $5.89 a bushel on Friday, may also gain support from supply hiccups, with concerns rising over a dry spell in Argentina, where corn is approaching the critical pollination period.

"Fundamentals are indicating tighter stocks and any further weather related issues in 2010-11 or into 2011-12 will offer strong price support."

'High-altitude price'

In fact, hopes of demand have been raised by growing expectations for Chinese purchases, with Shanghai JC Intelligence, the respected private analysis group, lifting by 1.7m tonnes to 7.5m tonnes its forecast for the country's corn imports.

The upgrade followed a forecast on Thursday by Thomas Dorr, president of the US Grains Council, that Chinese imports would surge from 1.5m tonnes in calendar 2010 to 7.4m tonnes in 2011.

Commerbank analysts said on Friday: "China would finally become one of the world's largest importers of corn, after still being a net exporter up to the end of last year.

"The price of corn should therefore continue its high-altitude flight."

Upgrade doubts 

China has actually been raising official forecasts for the domestic corn crop in 2010-11, the latest upgrade coming yesterday when it increased its estimate by 3.5m tonnes to a record 172.5m tonnes.

However, official forecasts are widely questioned, amid concerns they are inflated by a method of handouts to provinces which rewards reported production, fears which are lent support by high domestic prices.  

"Few believe this number," US Commodities said.

Shanghai JC Intelligence estimates the crop at 153m tonnes, and demand at 162m tonnes.