April 23, 2008

 

CBOT Corn Outlook on Wednesday: Down 2-3 cents on overnight action

 

 

U.S. corn futures are expected to open 2 to 3 cents a bushel lower Wednesday after a weak overnight session and as prices retreat slightly from recent gains, analysts said.

 

Chicago Board of Trade May corn fell 3 1/4 cents in overnight electronic trade to US$5.91, July was down 3 cents at US$6.04 3/4 and December lost 2 1/2 cents to US$6.16 1/2 a bushel.

 

Corn traders are also eyeing the key energy and precious metals markets for potential guidance, which are lower to sharply lower in the early going. June crude oil is down US$1.04 cents to US$117.03 a barrel and June gold in pit trade is down US$21.40 at US$903.80 an ounce.

 

Weather conditions across the eastern Midwest are more favorable for drying, and some farmers may be able to get some fieldwork preparation and planting done, but western and central areas are still too wet. A new weather system will begin to affect the western belt later Wednesday, however, bringing significant rain and cold temperatures, which will further delay planting, private forecaster DTN Meteorlogix said.

 

"Rains are in the forecast for later this week and into early next week, which will likely keep farmers out of the fields for a few more days," one Illinois corn merchandiser said.

 

A southern Iowa corn processor said there may be pockets of planting operations around the Midwest, but many areas remain on the sidelines, "which will make the job of determining the rate of planting activity all the more difficult."

 

In the western corn belt, a combination of rain, showers and thunderstorms will develop on Thursday and continue into Friday, with rain totals ranging from 0.50-1.50 inches and locally heavier amounts. Rain or snow will redevelop on Saturday and continue into Sunday, bringing an additional 0.25-0.75 inch of precipitation.

 

The eastern belt will see scattered showers and thunderstorms with 0.30-1.50 inches of rain expected. Rain or snow will affect the area on Sunday, with 0.25-0.75 inch forecast, Meteorlogix said.

 

The six- to 10-day outlook calls for average to below-normal temperatures and average to above-normal rainfall.

 

In other news, U.S. lawmakers on Capitol Hill held a hearing to discuss the issue of large speculative investors in the futures markets and the effect they've had on price discovery and market volatility. Commodity Futures Trading Commission Chairman Walter Lukken said the impact of billions of dollars of speculative investment in U.S. agricultural futures is unclear, but there are tools, such as swaps contracts, to counter volatility.

 

American Farm Bureau Federation President Bob Stallman went so far as to say speculators have hijacked the futures market and have transformed them from a risk management tool for farmers into an "investment vehicle."

 

China's corn futures were firmer Wednesday on improving demand for livestock feed.

 

For the week to Wednesday, cash corn prices were mixed across China amid improving end-user bids. Farmers have limited stocks so processing plants are raising their bids in order to attract corn to the market, traders said. Farmers will likely decrease sales, however, and divert more of the grain for hog feed.