March 31, 2008

 

CBOT Corn Outlook on Monday: Up sharply on bullish reports, weather

  

 

A lower estimate of U.S. farmland planted to corn this year, lower-than-expected quarterly stocks and adverse weather are expected to boost corn prices by 15-30 cents a bushel at Monday's open, traders and analysts said.

 

"You've got a lower-than-expected (planting) number, plus you have the weather that we have right now, and the stocks number was also lower than expected. Everything was supportive this morning," said Shawn McCambridge, senior grains analyst at Prudential-Bache, referring to the U.S. Agriculture Department's March planting intentions and quarterly grain stocks reports.

 

The USDA said in its initial report of the 2008 growing season that corn planted acres would total 86.014 million, down 8% from 93.6 million in 2007, when corn area was its largest since 1944. Analysts surveyed by Dow Jones Newswires pegged the acreage number at 87.387 million on average.

 

Higher prices for competing crops such as soybeans and wheat, high input costs and crop rotation considerations are pushing farmers to plant less corn this year, the USDA said. Corn acreage is expected to remain at historically high levels, however, on expectations for strong prices due partly to the continued expansion in ethanol production, the USDA said.

 

The USDA also issued its estimate of quarterly corn stocks, pegging them at 6.859 billion bushels. The number was lower than expectations but up from 2007 stocks of 6.068 billion.

 

Early calls have corn opening 20-30 cents a bushel higher on the news. McCambridge said he leans toward 15-20 cents higher, but "wouldn't be surprised to see the limit."

 

Possibly even more bullish for the market are concerns that cool, wet weather will not allow farmers to get into the fields in time to plant the amount of corn they need to.

 

"You start out with a low intention figure, and in order to increase that you have to get in the fields. And we have to have a good planting season in order to support an increase in acres," McCambridge said.

 

Precipitation is currently moving through the Midwest, averaging 0.30-1.5 inches in some areas, which will keep the fields soggy. The six- to 10-day outlook doesn't offer much relief, with near to below-normal temperatures and above-normal precipitation, DTN Meteorlogix said.

 

If conditions remain wet, it could likely support an increase in soybean acres, another analyst said.

 

In other news, index funds cut their long corn futures and options position by 12,461 contracts, but added 3,163 to the short side of the market. Index funds are net-long 433,866 contracts as of March 25, the Commodity Futures Trading Commission said in its Commitments of Traders report.

 

Traditional funds decreased longs by 39,574 contracts and trimmed 2,787 shorts, leaving them net-long 146,148 contracts, the CFTC said.