April 15, 2008

 

CBOT Corn Review on Monday: Weather worries, fund buying boost prices

 

 

U.S. corn futures climbed on speculative buying linked to concerns producers may have trouble getting the crop planted in time with wet weather in the forecasts for later this week, analysts said Monday.

 

Funds purchased about 3,000 contracts of corn to lead the buying interest.

 

May pit-traded corn on the Chicago Board of Trade rose 7 1/2 cents to settle at US$5.91 3/4, and new-crop December added 9 1/4 cents at US$6.13 1/4 a bushel.

 

"There's always that danger that you don't get as many acres in and so you have to switch back to beans," said Sid Love, analyst at Kropf & Love Consulting in Overland Park, Kan.

 

While there is still time to get the crop planted, recent delays and forecasts for potentially more heavy rains late this week give rise to fears that the wet weather pattern may not break anytime soon.

 

Traders anticipate the crop is 2%-4% planted as of Sunday, down from the 10-year average of 6% planted. The U.S. Agriculture Department will issue its weekly crop progress report Monday at 4 p.m. EDT.

 

After a few dry days, private forecaster T-storm Weather said there are indications that a narrow but particularly heavy band of rain in excess of 2.00 inches may fall on a portion of Illinois, Indiana, Missouri and/or southeastern Iowa later this week.

 

Aside from the weather issues, the underlying problem for the market is that demand is so strong that producers must plant more than the USDA-estimated 86 million acres or curtail use.

 

"Somebody has to blink - whether it's the (livestock) feeders, the exporters or the ethanol people. So somebody, or maybe all, will have to slow down their demand, I think that's what the market is trying to say," Love explained.

 

Poultry giant Pilgrim's Pride said Monday it plans to cut weekly chicken processing by 5%, beginning in June, and may shutter a production facility, to offset high corn and soymeal costs.

 

High food costs have also caught the attention of world leaders, who addressed the topic at an economic forum in Washington over the weekend, saying food shortages and skyrocketing prices are a potentially greater threat to stability than the current credit crisis.

 

Despite high CBOT corn prices, export demand is expected to remain a supportive feature.

 

Export inspections for the week to April 10 were price-friendly, totaling 45.405 million bushels, down from 50.831 million the previous week but topping pre-report estimates that ranged from 38-44 million bushels.

 

The USDA said 100,000 tonnes corn were sold to South Korea, half for 2007-08 and half for 2008-09. In addition, 116,000 tonnes were sold to unknown destinations for 2007-08.

 

In other markets, CBOT oat futures finished higher with corn, a floor trader said. May oats edged up 1 cent to US$3.86 per bushel.

 

Ethanol futures closed mixed. May ethanol rose 1.1 cent to US$2.491 per gallon, and July ethanol slipped 1.5 cent to US$2.37.