April 10, 2008

 

CBOT Corn Review on Wednesday: Rallies on speculative buying, bullish data

 

 

Chicago Board of Trade corn futures rallied on widespread speculative interest in commodities and on news that U.S. and world ending stocks continue to tighten as demand strengthens, analysts said Wednesday.

 

CBOT May corn rose 13 3/4 cents to settle at US$6.05 a bushel, July gained 13 3/4 cents to US$6.18 and December added 16 1/2 cents to end at US$6.20, after setting new records during the session.

 

Nearby May pit-traded corn set an all-time high of US$6.16 a bushel, beating the old mark of US$6.02 1/2. July rose to a record US$6.28 1/4 after racing past the previous high of US$6.15, and new-crop December established a new high of US$6.28 1/2, trading past the old mark of US$6.13 a bushel.

 

The U.S. Department of Agriculture lowered its estimate of 2007-08 U.S. ending stocks by 155 million bushels to a lower-than-expected 1.283 billion, due largely to a 200-million-bushel increase in feed and residual use, which more than offset a 100-million-bushel decrease in corn for ethanol production. Demand was further enhanced by an upward adjustment of 50 million bushels in 2007-08 exports.

 

The data heightened concerns that stocks could be driven to disconcerting levels.

 

"My analysis says we could be at 500 million bushels in ending stocks by next summer (2009) using the USDA's estimate of 86 million planted acres," said Bill Nelson, analyst and associate vice president at Wachovia Securities in St. Louis, using a yield of 150 bushels an acre.

 

Even if producers get an additional 2 million acres planted that would still leave the market with a tight 800 million bushels of stocks.

 

"That's still pretty tight," Nelson said.

 

The corn rally will likely either buy more acres away from soybeans or will trim demand, either of which would help loosen up the U.S. balance sheet, analysts said.

 

Corn futures were also supported by the strong price outlook, after the USDA raised season-average farm prices to a range of US$4.10-US$4.50 a bushel, from US$3.75-US$4.25 in March.

 

Nelson said the bullish momentum could push corn futures to US$6.50 a bushel, if the weather doesn't dramatically clear up and allow producers to begin widespread planting.

 

In the world data, ending stocks fell by 1.06 million metric tonnes on increased feed use and exports, which more than offset a rise in global production, the USDA said.

 

In addition to the friendly data, the rally in energy and metals markets propelled the overall commodity complex to sharp gains Wednesday, with fund buying in corn and soybeans contributing to the rally. Major commodity index posted sharp gains as a result.

 

Commodity funds bought an estimated 8,000 corn contracts and 5,000 soybean contracts.

 

The push to record highs, however, attracted profit-taking, and prices closed down from record highs.

 

Market participants continue to watch the weather forecasts for indications that the current cool, wet pattern over the U.S. Midwest and Delta region may break. Some forecasts suggest warmer, drier air will infiltrate the region this weekend and into next week, though there is enough uncertainty among weather models that traders are treating the forecasts very cautiously, a broker said.

 

In other markets, CBOT oat futures soared on spillover support from rallies in the neighboring corn and soy markets, a trader said. May oats closed up 18 1/2 cents at the session high of US$3.89 a bushel.

 

Ethanol futures jumped, as May finished 4.1 cents higher at US$2.555 a gallon.