April 15, 2008

 

CBOT Corn Outlook on Tuesday: 3-6 cents higher on slow planting pace

 

 

U.S. corn futures are expected to open 3-6 cents a bushel higher on a spring planting pace at the low end of estimates and on overall grain and oilseed strength, analysts said Tuesday.

 

Overnight trading saw May corn add 5 3/4 cents to US$5.97 1/2, July corn was up 5 1/2 cents at US$6.10 1/4 and December added 5 3/4 cents to US$6.19 a bushel.

 

Speculative buying in crude oil and precious metals is also expected to be supportive for the Chicago Board of Trade grain and soybean complex.

 

The U.S. corn crop was 2% planted as of Sunday, down from the five-year average pace of 7%, the U.S. Agriculture Department reported Monday afternoon in its weekly Crop Progress report.

 

Notable in the report is that Illinois, which normally averages about 9% planted by mid-April, doesn't have any corn planted yet because of the soggy, cool conditions. Missouri is running about two weeks behind average. While dry conditions are expected through Wednesday, these areas are expected to receive more rain by Thursday and Friday.

 

Analysts had expected the total U.S. crop to be about 4% planted, but the wet weather has kept many farmers from preparing seedbeds for planting and progress continues to fall behind schedule, analysts said.

 

"Unless it dries out it may be a struggle to get the 86 million (acres) in the ground, let alone the extra 1 million to 3 million being talked about (since the March planting intentions report was released)," said Joel Karlin analyst at Western Milling Quality Feeds.

 

Heavy early season rains and excessive ground moisture, like what has been seen in some areas this spring, can lead to a compromised root system on the corn plant. This can be detrimental to yields if conditions turn dry later in the season and the roots are unable to reach deep for moisture, he explained.

 

The weather forecasts will continue to drive the corn market, however.

 

The western corn belt will be dry Tuesday with a few light showers possible Wednesday. Rains of 0.30-1.5 inches are possible through southern and east-central areas of the belt Wednesday night into Thursday and Thursday night, with drier conditions returning on Friday, DTN Meteorlogix said.

 

The eastern corn belt will also be dry Tuesday and Wednesday, with chances for rain or thunderstorms developing through west-central and northwestern areas late Thursday. Rain and thunderstorms will be seen Thursday night and Friday, with drier weather settling in on Saturday. Rains in the eastern belt will also total 0.30-1.5 inches, Meteorlogix said.

 

The six- to 10-day outlook calls for average to above-average rainfall in the western belt and near to below normal in the east. Temperatures are expected to average near to above normal.

 

In other news, China will not likely be a large corn importer in over the next two years because of high global prices, the China National Grain and Oils Information Center said Tuesday. China's 2007-08 corn supply is expected to exceed demand by 2.5 million metric tonnes, an analyst there said. Despite a decline in planted area, China's 2008 output may rise 0.7% on the year to 149 million tonnes due to increased yields.

 

In an export sale that was originally reported on Monday, the USDA said 116,000 tonnes of corn was sold to South Korea for the 2007-08 marketing year. The original story attributed the sale to unknown destinations.

 

Technically, bulls still hold the advantage in July corn, although Japanese candlestick chart analysts shows in recent sessions potentially bearish belt-hold lines and engulfing patterns have emerged, which could contribute technical price pressure, an analyst said.

 

Despite that fact, if near-term pressure does develop July corn can be expected to find solid support near US$5.80 and then again near the 40-day moving average of US$5.73 a bushel, he said.