February 27, 2010

 

CBOT Corn Review on Friday: Up on technical strength, crop jitters, dollar

 

 

Technical momentum and early jitters about potential planting delays pushed Chicago Board of Trade corn futures to their highest price in six weeks Friday.

 

Nearby March corn futures ended up 5 3/4 cents, or 1.5%, at US$3.78 per bushel. The contract gained 5.2% on the week.

 

The market, which had been mired in a deep slump since mid-January, started the week on an up note amid what is a virtual rite of spring for corn traders: concern that the crop won't be planted on time.

 

Reports from the National Weather Service as well as some private weather services at the end of last week noted the danger of flooding this year from the Red River to parts of Indiana and Ohio, as a heavy snowpack is primed to unleash the equivalent of as much as 10 inches of rain once it melts.

 

Although the vast majority of corn growers are several weeks from their normal planting date, the concern was enough to offer background support this week, traders and analysts said.

 

"It's going to be a while before the ground is going to be able to start to absorb any of the melted snow," said Joel Karlin, analyst for Western Milling. "It's going to preclude any early start to fieldwork."

 

Some traders add that weather forecasts aren't encouraging for farmers hoping to see their fields dry out during the month of March.

 

Still, talk of planting delays in February are "just ridiculous," Karlin said. Some traders also point out that planting was weeks late the past two years, which did not prevent solid, or in the case of 2009, record crops.

 

Some say the planting concerns are merely a fundamental excuse for a rally that has had more to do with technical charts. The market typically makes a seasonal low around this time of year, and traders said that recent action has clearly established that low.

 

Analysts also said that traders on Friday were covering some short positions given the improved technical outlook, and that end-of-month fund buying added to the rally.

 

Weakness in the dollar supported commodities generally, traders added, as soy and wheat also climbed.

 

Despite this week's gains, prices are still well off January highs of around US$4.25, before a bearish 2009 crop estimate from the U.S. Department of Agriculture sent prices tumbling.

 

Traders are awaiting new USDA reports March 10, which will update demand projections and possibly revise the estimate of the 2009 crop, some of which has remained in the field all winter due to early snow.