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Corn, Soy Premiums Rise as Price Drop Slows Sales by Farmers

May 26 (Bloomberg) -- Cash premiums for corn and soybeans shipped to export terminals near New Orleans widened relative to Chicago futures after a slump in prices discouraged U.S. farmers from selling inventories left over from last year’s crops.

The spot-basis bid, or premium, for corn delivered in May was 45 cents to 48 cents a bushel above July futures yesterday on the Chicago Board of Trade, compared with 44 cents to 48 cents on May 24, government data show. The soybean premium rose 60 cents to 65 cents a bushel above July futures from 60 cents to 62 cents.

“Farmers just aren’t selling much with prices falling,” said Garrett Toay, a commercial grain analyst for Toay Commodity Futures Group LLC in Clive, Iowa. “Farmers don’t have many soybeans left to sell, and now they will wait to see what happens with the weather in June to sell corn.”

Corn futures for July delivery fell 6.75 cents, or 1.8 percent, to $3.6425 a bushel yesterday in Chicago, the largest decline since May 17. The grain climbed in the previous three sessions on demand from China, the world’s second-largest consumer.

Soybean futures for July delivery dropped 10 cents, or 1.1 percent, to $9.305 a bushel yesterday on the CBOT, the ninth decline in 10 sessions. Earlier, the price touched $9.275, the lowest level for a most-active contract since March 15.

The average price for soybeans delivered to New Orleans fell 0.9 percent yesterday to $9.93 a bushel, the lowest level since May 17. Corn bids fell 1.5 percent to $4.1075 a bushel.

Shipping Costs

Lower costs for barge shipments also helped to firm cash premiums, Toay said.

The cost of moving grain along the upper Illinois River to New Orleans fell to 325 percent of the 1976 published tariff rates, compared with 340 percent on May 24, Toay said. That would reduce transportation costs by about 1.5 cents a bushel, he said.

“Freight was a little cheaper, and that helps to strengthen bids,” Toay said. “There’s not much grain moving right now.”

Corn bids will likely stay firm into June on speculation that China, the second-biggest consumer of the grain, will buy more from the U.S., Toay said.

China already has booked almost 1 million metric tons of the feed grain from the U.S. and will probably buy more, Alvaro Cordero, the manager of international operations-marketing at the U.S. Grains Council, said from Tokyo on May 24.

In a sign of domestic demand, China has held six weekly auctions of corn reserves to reduce record prices. Yesterday, the government sold 99 percent of the grain offered. About 979,600 of the 993,300 tons were sold at 1,724 yuan ($252) a ton, the National Grain & Oil Trade Center said on its website.

“The threat of larger Chinese corn purchases will remain a positive factor,” Toay said. “Corn should hold firm until we see what happens with the weather in June and July,” when Chinese and U.S. crops will be reproducing and beginning to fill kernels with sugars and starches, Toay said.

To contact the reporter on this story: Jeff Wilson in Chicago at jwilson29@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net

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