UPDATE 2-Mexico makes biggest US corn buy in decades as crop shrinks
* Mexico buys 1.516 million tonnes U.S. corn
* Two-thirds will come from this year's drought-hit crop
* Deal could trigger purchases by other countries (Recasts; adds quotes, details; changes dateline to CHICAGO, adds byline)
By Karl Plume and Julie Ingwersen
CHICAGO, Aug 2 (Reuters) - Mexico raided the U.S. corn market by making the biggest one-day purchase in over two decades this week, the first clear sign of global anxiety over the decimated U.S. crop.
Mexico, the No 2 importer of U.S. corn after Japan, bought 1.516 million tonnes, the U.S. Agriculture Department said on Thursday, a move traders said could touch off a frenzy of buying by other countries who have been caught flatfooted by the worst U.S. drought in 56 years.
"The corn sales to Mexico seem like desperation to get some coverage in place," Bill Nelson of Doane Agricultural Services in St Louis, Missouri.
The deal comes at a time when global consumers are on high alert for a repeat of the 2008 buying spree that many blame for exacerbating the surge in food costs. Gregory Page, chief executive of global grain giant Cargill, warned this week that importers must refrain from racing to stockpile extra grain if the world is to avoid a further damaging spike in prices.
Mexico is particularly sensitive about corn. It is used there to make tortillas, a food staple, the price of which has already risen nearly 18 percent since January, according to Mexico's economy ministry. Riots broke out over surging tortilla prices in 2008.
While Mexican importers have regularly made large one-day purchases around this time of year, this week's deal was twice as large as recent buys, traders said. In fact, it was the biggest ever by Mexico and the largest by any country since the Soviet Union bought 3.72 million tonnes in January 1991.
About two-thirds of the 1.5-million-tonne purchase will be corn that is harvested this autumn, a crop that has shrunk by more than a quarter since initial estimates early this year.
A THIRD FOR 2014
The rest of the corn will be from the 2013/14 year that will be planted next spring, according to the USDA.
This deal came as a surprise to traders, since normally deals for the following crop year won't pick up until December or January at the earliest.
But they noted that Chicago Board of Trade corn futures for December 2013 delivery, which represent the 2013 harvest, were trading near $6.30 per bushel -- a significant discount to December 2012 futures, which were trading near $7.90 after surging more than 55 percent since mid-June.
"If you're an end-user and you just got clobbered and bought $8 corn, then $6.30 corn looks like a really good deal," said Jim McCormick of Allendale Inc in McHenry, Illinois.
The huge sale comes amid rising global food security concerns and worries about food inflation.
Mexico is already low on supplies after suffering its own devastating drought in 2011, sending the price of meat and domestic food staples higher.
The potential negative impact of food prices on the frail global economy has reignited the food-versus-fuel debate as a chorus of critics question the wisdom of a mandate requiring that a third of the U.S. corn crop be converted into ethanol.
Large purchases by Mexico are not unprecedented. The USDA announced an 822,900-tonne U.S. corn sale to Mexico on June 7, 2011, and an almost identical volume on Oct. 7, 2010.
"It happens pretty much every year around this time, a big rail program that gets put together," a U.S. corn exporter said.
By law, exporters must report promptly the sale of 100,000 tonnes or more of a commodity to the same destination within a day. Sales of smaller amounts are reported on a weekly basis. (Reporting by Charles Abbott in Washington and Julie Ingwersen, Karl Plume and K.T. Arasu in Chicago, Gabriel Stargardter and David Alire Garcia in Mexico; Editing by Bob Burgdorfer)
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