* 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,
By Karl Plume and Julie Ingwersen
CHICAGO, Aug 2 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)