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Evening markets: ethanol and frost fuel corn rally

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The return of US frost fears, coupled with a rumour of American ethanol exports to Brazil, sent corn jumping, which in turn helped wheat shrug off early blues.

Many forecasters have begun putting cold temperatures on the radar, starting at the end of this week.

Meterologix forecast "frost and freeze conditions likely developing early Saturday through western and north western areas" of the US Midwest.

"A hard freeze is possible through western and northern areas later this week or weekend."

Ethanol powered

An added bonus for corn was talk that Archer Daniels Midland, the US crop trading giant, was poised to export US-made ethanol to South America to meet Brazil's growing need for the biofuel.

"This rumour helped fuel the big rally in corn today," Vic Lespinasse, the GrainAnalyst.com analyst, said.

Brazil's bioethanol typically comes from sugar cane. However, mills have been squeezed by tight credit at a time when many carry huge debts from investment and an ethanol market which was, for a while, unprofitable.

In fact, ethanol prices in Brazil were reported on Monday as hitting their highest since April 2007.

Meanwhile, cane supplies have been hurt both by heavy rain, which has hampered harvesting and reduced the sugar content. And most of what cane there is has been siphoned off to meet the huge demand for sugar for human consumption.

Factored in?

Corn for December closed up 9.25 cents at $3.42 ¾ a bushel.

Wheat was pulled higher in sympathy, closing up 1.5 cents at $4.43 a bushel, with a feeling that it has been punished enough for bumper supplies also providing support.

"Some traders think all the bearish news is already factored into wheat so there is little incentive to continue selling it, at least for now," Mr Lespinasse said.

In Europe, wheat ended higher too, up E0.50 to E123.50 a tonne for Paris November milling wheat, and up £0.10 to £98.60 for London's November feed contract.

Mixed beans bag

Soybeans also ended in positive territory, but not as far as had appeared likely when they made an assault on the $9-a-bushel mark earlier.

The November lot retreated to end up 2 cents at $8.87 a bushel.

Besides pressure from the early US harvest, the crop is feeling some flak from the prospect of huge South American production ahead.

This week, it will also lose the prospect of large sales to China, which is celebrating National Day holidays all week.

By Agrimoney.com

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