February 12, 2009

Chicago Board of Trade corn futures are expected to open slightly higher Thursday following virtually unchanged trade overnight and strong export sales reported Thursday morning, traders said.

 

Corn is called 1 to 2 cents higher. In overnight trading, March corn was down 1/4 cent to US$3.68 1/4 per bushel and May corn was down 3/4 cent to US$3.77 3/4.

 

Net export sales for the week ended Feb. 5 were 1.54 million metric tonnes, a marketing year high, up from 1.216 million metric tonnes the prior week. Analysts had expected sales between 850,000 and 1.2 million metric tonnes.

 

Sales have topped 1 million metric tonnes for four straight weeks.

 

The lack of exports coming out of China and problems with the South American crop have caused U.S. exports to be "backloaded" this year, said Terry Reilly, analyst for Citigroup. Thursday's sales report is supportive, he said, but not a reason to be long-term bullish, Reilly and traders said.

 

"They will never be sustained if we see a strong rally," a trader said of the strong export sales. "That's the dilemma with the demand side."

 

One encouraging thing about the export sales, the trader said, is that sales to South Korea continued to be strong, with 484,000 metric tonnes reported Thursday. The trader said their purchases show that they are turning away from feed wheat in the Black Sea region, which has provided stiff competition for U.S. corn in recent months.

 

"They're just securing what they need," Reilly said. "They can't secure what they need from China, so they're turning to the U.S."

 

Weather in South America, particularly in Argentina, remains a focus of the market. Recent rains in Argentina are adding pressure, Reilly said. Some traders and analysts say that the potential for a return to hot, dry weather could be supportive, particularly for soybeans, which would in turn support corn.

 

On Wednesday the USDA attache lowered its Argentina corn production forecast to 13.8 million metric tonnes due to lower area and yields, stemming from this year's severe drought. The attache said almost 90% of the planted area in the province of Entre Rios has been lost due to drought.

 

The USDA's supply and demand report this week lowered the projected corn crop in Argentina to 13.5 million metric tonnes.