Maize has had a firm start to the year with the realization that the market will be tight despite the incentives for farmers to increase plantings.

The world maize market is expected to stay in deficit in 2012-13 with production predicted at 880 million tonnes and demand at 884 million. Continued crop concerns in South America and reports of additional purchases by China were contributing to a bullish market tone.

“There are conflicting reports of the size of this year’s Chinese corn production and the levels of import needed,” Jonathan Lane, trading manager at U.K. trader Gleadell, said in a report on the market. “Local analysts continue to work with corn numbers lower than the USDA for Argentina and Brazil, leading analysts to believe U.S. stocks will continue to tighten this year.”

He highlighted the importance of the USDA’s plantings report, not yet out at the time of writing, as did the U.S. Grains Council.

“Corn producers are again reminded this week that if USDA’s reports are considered moderately bullish, then the December 2012 (new crop) contract is likely to increase against the May and July 2012 (old crop) contracts, causing the old crop/new crop spreads to narrow,” it said. “Additionally, if the combination of USDA report data and weather conditions paint a somewhat bearish scenario, then domestic and international buyers are likely to limit their summer purchases. As a result, large speculators, who have been recently buying at relatively high prices, could be forced to reevaluate their newly established positions in nearby contracts. Once again, the old crop/new crop spread could narrow.

“The market is currently offering a favorable marketing opportunity for corn producers who still have some old crop corn in storage. Of course, there are other important factors that will influence corn prices this summer.”

The picture was little changed since the IGC issued its most recent Grain Market Report. “U.S. maize (corn) values remained firm, supported by reports of crop losses in South America and active export interest for remaining old crop supplies, although forecasts of a further rise in U.S. plantings this spring added a bearish element,” it said.

Britain’s Home Grown Cereals Authority (HGCA) noted that U.S. maize growers were facing some of the highest price levels ever at the time when they were making their planting decisions.

“As a result, U.S. forecasters are suggesting the highest U.S. maize area since 1944,” it said in a report on the market. “However, the big assumption here is that average weather conditions prevail at planting time. As a result, the new crop grain market will be reluctant to react to these forecasts until it can see the crop in the ground and ‘kind’ growing weather.”

Rabobank’s analysts wondered if high soybean prices might get some area back from corn. “Corn will need to continue to follow the developments in the soybean complex as 2012-13 U.S. acreage is by no means finalized, and as recent soybean bullishness has left the soybean-to-corn price ratio above 2.3 — suggesting by our estimates that soybeans could begin buying back acreage from corn in some marginal states,” the bank said in an analysis published March 14.

In its most recent World Agricultural Supply and Demand Estimates report, the USDA put global 2011-12 coarse grain supplies 1.6 million tonnes higher “with production increases for Brazil corn and India corn and millet.”

“Partly offsetting are reductions in sorghum output for India and Argentina and corn output for South Africa and Ecuador,” it said. “Brazil corn production is raised 1 million tonnes on higher expected area for the second crop, which is planted following soybeans. India corn and millet production are raised 500,000 tonnes and 1.5 million tonnes, respectively, in line with the latest government crop assessments.”