April 29, 2008

 

CBOT Corn Review on Monday: Weather continues to push prices higher

 

 

Chicago Board of Trade corn futures closed higher Monday, as cold, wet weather forecasts continued to dwarf other factors, traders and analysts said.

 

May corn closed up 22 3/4 cents to US$6.00, July finished up 22 3/4 to US$6.13 1/2, and December increased 23 1/2 cents to US$6.30 1/4 a bushel.

 

A floor analyst said cold weather, including reports of snow Monday in northern Illinois and possible frost overnight, drove the rally. Long-range forecasts are equally gloomy across the Midwest.

 

Joel Karlin, a market analyst at Western Milling, said the continued weather problems are making it unlikely that corn plantings will exceed the government's March projection of 86 million total acres, as many had hoped.

 

"You're going to be hard-pressed to get this 86 million into the ground," he said.

 

It's already apparent that southern corn-growing states such as Kentucky, Tennessee and Missouri will not meet planting expectations, he said.

 

If conditions don't improve, it's possible that demand will have to be rationed, said Shawn McCambridge, a senior grains analyst at Prudential-Bache in Chicago. There hasn't been "serious rationing" since the mid-1990s, he said.

 

Karlin said there are some potential signs of weakening corn demand, including continued criticism of corn-based ethanol, which has become a "punching bag." The latest critic was Tyson Foods Inc. (TSN) President and Chief Executive Dick Bond, who called for an end to ethanol subsidies Monday. Karlin said traders are aware of the growing criticism of ethanol, but he and others said weather remains by far the biggest factor in the corn market.

 

Long-range forecasts aren't good for corn growers. Drew Lerner, owner of World Weather Inc., said there's a fundamental shift in rainfall patterns that will lead to significantly more rainfall in the northwest corn belt during the next two weeks. Although none of the Midwest should count on good planting conditions, the northwest corn belt will be hit particularly hard, with "excessively wet" conditions. That will include two rain systems, one later this week and another some time from May 8-12 or possibly later, Lerner said.

 

The corn market opened with increases of more than 15 cents, and a late-day rally pushed prices to session highs.

 

CBOT oat futures closed higher on fund buying, with some background pressure from commercial selling, a floor trader said. July oats jumped 9 cents to US$3.89 per bushel.

 

Ethanol futures jumped. June ethanol rose 2 1/2 cents to US$2.455 per gallon, and July ethanol ended up 1 cent at US$2.445.