April 16, 2008

 

CBOT Corn Review on Tuesday: Rally on funds, weather, bullish mentality

 

 

U.S. corn futures rallied on planting concerns and also benefited from fund activity after speculative accounts went on a buying spree to lift many commodity markets, analysts said Tuesday.

 

May pit-traded corn on the Chicago Board of Trade rose 14 1/4 cents to US$6.06, July added 14 3/4 cents to US$6.19 1/2 and December climbed 12 cents to settle at US$6.25 1/4 a bushel.

 

A bullish mentality permeates the CBOT corn market amid a smaller planted area than last year, continued strong demand and shrinking stocks.

 

"You've got a few things going on in corn. You've got lower-than-expected plantings, wet weather to non-drying weather in the forecasts and the U.N. is saying the global food crisis is of emergency proportions and the U.S. is making US$200 million available for food aid," said John Kleist, agricultural analyst at Allendale in McHenry, Ill.

 

"So you've got a bullish psychology that's feeding on itself dramatically," he said.

 

The White House announced Monday it would make US$200 million available to help address problems caused by rising commodity prices and unanticipated food needs. The move was in response to calls last weekend from world leaders to address the crisis, which has caused protests and riots in recent weeks.

 

Among the many influences in corn, weather is the most important as farmers attempt to start planting. And with the U.S. crop only 2% seeded as of Sunday, versus the 7% five-year average pace, concerns are mounting.

 

Rains totaling 0.30-1.5 inches are expected to begin falling over southern and east-central areas of the western corn belt sometime Wednesday and lasting into Thursday night. West-central and northwestern areas of the eastern belt are expected to see the same totals starting late Thursday into Friday, private forecaster DTN Meteorlogix said.

 

Another private firm, T-storm Weather, said a "helpfully drier pattern" is possible after next week's weather system passes, but the potential improvement is 10-11 days away and "is not imminent."

 

Traders are concerned that additional planting delays could make it difficult for producers to get the crop seeded in time to see trendline or above yields, which would risk seeing stocks falling to disconcerting levels, a trader said.

 

Spreading was also a feature as traders continued to roll positions out of May and into the July and other back months.

 

Commodity funds were responsible for the bulk of the buying interest, purchasing an estimated 5,000 corn contracts as of 1:30 p.m. EDT.

 

A sharp rally in crude oil to record highs helped trigger widespread speculative buying, and corn bulls took advantage of the situation to drive prices higher. New-crop December corn set an all-time high of US$6.28 3/4 during the session.

 

Profit-taking near the highs, however, limited the gains and prices closed off of their strongest levels of the day.

 

In other markets, CBOT oat futures rose on spillover support from corn and fund buying, a floor trader said. May oats jumped 7 cents to US$3.93 per bushel.

 

Ethanol futures finished higher. May ethanol closed up 4.2 cents at US$2.533 per gallon, and June ethanol settled up 3.9 cents at US$2.483.