April 2, 2008

 

CBOT Corn Review on Tuesday: Rallies on fund interest, weather worries

 

 

Chicago Board of Trade corn futures rallied to near-record or fresh record highs Tuesday. Prices rose on fund buying, bolstered by the need for the market to purchase acres from soybeans amid forecasts for continued wet weather and renewed flooding potential for parts of the southern corn belt and northern Delta, traders and analysts said Tuesday.

 

Nearby May corn gained 2.95%, adding 16 3/4 cents to settle at US$5.84 a bushel, near the session high of US$5.87 3/4. July corn reached a new all-time high of US$6.00 1/4, edging past the record high of US$6.00 set Monday, but settled just beneath those levels at US$5.98, up 16 cents on the day for a gain of 2.75%.

 

In addition to the weather concerns, a rally in the soybean pit spilled into corn and helped lift the market initially.

 

But weather conditions are vitally important if farmers are to plant 86 million acres as the U.S. Department of Agriculture forecast Monday in its planting intentions report, which if realized would be an 8% decline from last year's record planted area but still the second-largest area since 1944.

 

"It's the worst of all situations: We have wet weather and we need to buy the acres," said Don Roose, president of U.S. Commodities in Des Moines.

 

Private forecaster T-storm Weather calls for significant rains and flooding across the southern corn belt and northern Delta beginning Wednesday night, possibly setting back planting dates until at least April 10. And this planting season is shaping up to be critical in the face of high prices and strengthening demand both domestically and overseas.

 

"The upcoming crop year in the U.S. may be the most critical ever as dangerously low U.S. and overseas coarse grain and oilseed stocks necessitates a need for huge crops this fall," said Joel Karlin, analyst at Western Milling Quality Feeds.

 

However, at current price levels, it may not be possible for the corn market to buy acres from soybeans.

 

Given high fertilizer prices and strong soybean prices - even with the recent price drop - U.S. farmers are unlikely to switch from soybeans to corn, said Dan Basse, president of AgResource in a conference call hosted by Bear Stearns. For that to occur "we'd need to see a six in front for new-crop corn... new-crop corn would have to rise to US$6.40 to US$6.80 for any chance to buy back acres," he said.

 

CBOT December corn settled at US$5.93 for a gain of 12 cents Tuesday.

 

Meanwhile, oat futures rose on spillover support from new-crop soybeans, a floor trader said. Oats "weren't going to be left behind" when the soy complex bounced, he said. Funds continued to roll their positions by buying July contracts and selling May. May oats were up 16 3/4 cents at US$3.88 per bushel.

 

Ethanol futures ended lower. April ethanol fell 3.2 cents to US$2.482 per gallon, while May ethanol slid 1.7 cents to US$2.417.