April 29, 2008

 

CBOT Corn Outlook on Thursday: Up 7-9 cents on slow plantings, weather

 

 

U.S. corn futures are expected to open 7-9 cents a bushel higher on a slow start to the spring planting season and as forecasts suggest more wet weather will affect the Midwest later this week Tuesday, analysts said.

 

Corn is expected to follow through with overnight gains that saw prices rise to record highs. Nearby May was up 9 cents to US$6.09, July up 9 1/2 cents to US$6.23 and new-crop December up 9 1/2 cents to US$6.39 3/4 a bushel.

 

U.S. planting was just 10% complete as of Sunday, up from 4% last week but well behind the 35% average pace, the U.S. Agriculture Department reported.

 

"Concerns about the slow pace of planting should dominate the ag markets this morning. That was well below trade guesses of 15% to 19%, and compares to the five-year average of 35%," Bryce Knorr, senior editor with Farm Futures, said in his daily commentary.

 

Top grower Iowa only had 3% planted compared to the 12% at this time last year, while Illinois was 6% seeded versus 29% last year and the 55% average pace. Indiana corn was 11% planted, up slightly from 10% last year but behind the average of 30%, the USDA reported.

 

While weather conditions are now clear over the Midwest, many areas are still wet from recent rains and temperatures are cool. Readings will rise over the next few days, but another wet weather system is expected to move through the Midwest over the weekend, Knorr said.

 

Pockets of planting activity will likely occur this week, but producers won't get enough time for widespread planting to develop, an analyst said.

 

The western corn belt will be mostly dry Tuesday and Wednesday, while northern areas may see showers develop on Thursday. The western belt will likely see rain totals of 0.30-1.50 inches over the weekend, private forecaster DTN Meteorlogix said.

 

The eastern belt will also be dry Tuesday and Wednesday, with chances for light rain in northern areas on Thursday. Scattered showers and thunderstorms will be seen Thursday night and into the weekend, and rain totals here will range from 0.30-1.50 inches.

 

The Midwest six- to 10-day outlook calls for near- to below-normal temperatures. Rainfall should average near to above normal in the south and east and near to below normal in the northwest, Meteorlogix said.

 

In other news, U.S. Sen. Kay Bailey Hutchison, R-Texas, said she will soon offer a bill that would freeze the national biofuels mandate that was passed in December 2007 because of rising food prices. The mandate calls for 36 billion gallons of ethanol to be mixed with the nation's fuel supply by 2022, up from 7.5 billion in 2012, with an eventual transition to advanced biofuels such as cellulosic that are not expected to compete with food crops.

 

Hutchison said the correlation between government biofuel mandates and rapidly rising food prices has become "undeniable."

 

Secretary of State Condoleezza Rice said on Monday that diverting cropland for biofuel production is partly to blame for rising food prices around the world.

 

While it admits the rush to ethanol has changed the dynamics of the corn market, the ethanol industry puts more the blame of rising world food prices on skyrocketing transportation costs in the wake of record high oil prices and the speculative fund money that has infiltrated the markets and increased volatility.

 

In other markets, crude oil is down sharply, precious metals are trading lower and the U.S. dollar is stronger against the world's major currencies. This is leading to sharp losses among the major commodity indexes and may serve to limit the rally in grains.