April 9, 2008

 

CBOT Corn Review on Tuesday: Modest gains ahead of USDA data

 

 

U.S. corn futures were steady to firmer Tuesday, supported by traders positioning ahead of the U.S. Agriculture Department's April supply/demand report and as prices consolidated after recent declines, analysts said.

 

Nearby May corn on the Chicago Board of Trade gained 1 1/4 cents to settle at US$5.91 1/4, and new-crop December was unchanged at US$6.03 1/2 a bushel.

 

"We had kind of a consolidation day and a little bit of a 'turnaround Tuesday' type of atmosphere after the breakdown yesterday," said Jack Scoville, analyst and vice president at Price Futures Group in Chicago, referring to the markets' tendency to reverse direction from Monday.

 

Traders are also preparing for the supply/demand report, which is expected to confirm ideas of strong demand and shrinking supplies.

 

On average, analysts expect the USDA to cut U.S. 2007-08 ending stocks by 135 million bushels to total 1.303 billion because of increased feed and residual demand.

 

Analysts widely expect farmers to plant more than the 86 million acres the USDA estimated last week in its March planting intentions report. Mike Woolvertonne, Kansas State University research and agricultural economist, said it is not likely acres will be that low since the survey is more than a month old and price ratios have switched to favor more corn acres.

 

"Right now, producers can make more with corn," he said in a research note.

 

Meanwhile, early price support also stemmed from higher wheat and soybean prices, which spilled over into corn. But corn held up relatively well considering soybeans turned south by the close, a trader said.

 

Concerns about wet weather delaying Midwest plantings continues to be mildly supportive for corn, with rains Tuesday moving over parts of Iowa, Illinois, Missouri and southern Wisconsin. Moderate to heavy rains are also forecast for Thursday and Friday, though some bearish traders point to a potential break this weekend and the first half of next week that should allow farmers to begin planting in earnest, an analyst said.

 

Beyond next week, however, the forecasts hold enough uncertainty to keep traders guessing. One model shows much warmer and drier air filtering into the Corn Belt, which would support planting efforts, but Mike Tannura, meteorologist and commodity analyst at T-storm weather, said that could be followed by more rains and thunderstorms. In all, he favors an improved weather pattern for planting but not as favorable as this particular weather model suggests.

 

Traders were also busy rolling positions out of nearby May and putting on spread trades, a broker said.

 

Large funds had purchased a net 2,000 corn contracts as of 1:30 p.m. EDT.