April 1, 2008

 

CBOT Corn Review on Monday: Firm but off highs; profit-taking, spillover

 

 

U.S. corn futures rose on bullish U.S. Department of Agriculture planting and stocks data, but prices came off the highs on profit-taking and spillover selling from sharp losses in soybeans, energies and metals, analysts said.

 

On the Chicago Board of Trade, nearby May futures gained 6 3/4 cents to settle at US$5.67 1/4 a bushel but was down from the US$5.88 record high set early in the day.

 

"A little profit-taking was in order," after more bullish planting estimates had circulated the market last week, said independent agricultural analyst John Kleist.

 

The USDA said in its March planting intentions report, the first survey-based indication of the 2008-09 growing season, that farmers would plant 86.014 million acres to corn, down 8% from 93.6 million in 2007, when corn area was its largest since 1944. Despite the year-to-year decline, corn intentions are still the second-highest since 1949, the National Corn Growers Association said.

 

The USDA cited higher prices for competing crops such as soybeans and wheat, high input costs such as fertilizer and fuel and crop rotation considerations for the decrease.

 

"We need access to more affordable sources of natural gas for fertilizer production and we're concerned about the impact of higher crude oil prices on farmer profitability," said NCGA president Ron Litterer in a press release.

 

The largest acreage reduction was in top-grower Iowa, which was expected to be down 1 million acres from last year to total 13.2 million. Indiana and Minnesota are expected to each lose 800,000 acres from last year, the USDA said.

 

However, U.S. corn acreage is expected to remain at historically high levels on expectations for strong prices due partly to the continued expansion in ethanol production, the USDA said.

 

The government also issued its estimate of quarterly corn stocks, pegging them at 6.859 billion bushels, which was much lower than expected and also boosted bullish market sentiment.

 

Considering how high corn prices are at present, Kleist questions whether traders would want to take values up to near US$7 a bushel for fear it would diminish feed demand, for example.

 

But Bill Nelson, associate vice president at Wachovia Securities in St. Louis, said the market must buy more acres to satisfy the huge appetite for corn, both in the U.S. and around the world.

 

"We surely need a lot more acres of corn than 86 million, especially given further growth in ethanol demand, high energy prices and the fact that China is not exporting corn for at least the rest of this crop year. And our country seems to have a competitive advantage growing corn and it seems like the market has got to do something to encourage these plantings," Nelson said.

 

That could come in the form of higher corn prices or lower soybean prices, either of which would likely boost corn seedings. Soybeans fell their limit, down 70 cents a bushel, on bearishly construed crop data.