May 6, 2008

 

CBOT Corn Outlook on Tuesday: Up 2-4 cents on slow planting progress

 

 

Chicago Board of Trade corn futures are expected to open 2-to-4 cents higher Tuesday on overnight gains and slow U.S. planting progress.

 

In overnight trading May corn was up 2 3/4 cents to US$5.84 3/4 per bushel, July was up 3 cents to US$5.97, and December was up 2 3/4 cents to US$6.15 1/2.

 

Those gains were fairly unimpressive given Monday's losses, a couple of traders said. In Monday trading, July corn was down 19 1/2 cents to US$5.94.

 

One trader said the overnight increase probably stemmed from the U.S. Agriculture Department's planting progress report released Monday afternoon, which showed plantings at 27%, compared to the five-year average of 59%.

 

The trader said that corn's Monday drop, despite other supportive factors such as higher crude oil, showed there was some "corrective potential."

 

Another trader said the outlook for crude oil prices continue to be supportive for corn. He noted that Goldman Sachs today raised the possibility of crude oil reaching US$150-US$200 per barrel as soon as this year.

 

John Kleist, a broker/analyst and Allendale in McHenry, Ill., said crude oil prices could get so high that they start to push corn prices lower.

 

"You're going to make it so expensive that people won't be able to make much money on biofuels," Kleist said.

 

Concerns over ethanol, and what one trader termed the "legislative question mark" surrounding it, are weighing on corn prices. Traders and analysts said it could be making investors wary of corn, as the long-term demand becomes less clear.

 

"It's a world-wide psychological thing," Kleist said.

 

Kleist said there was some good news in Monday's drop, as July corn held its major moving 45- and 50-day moving averages. He said a drop below those averages, around US$5.85 1/2 and US$5.83 1/4, could cause more downward momentum.

 

Weather remains a key factor, as growers look for opportunities to get their corn planted. Corn yields generally start declining if the crop is not planted by mid-May, traders and analysts say.

 

Tuesday is forecast to be the third straight day of mostly dry conditions across the Midwest. Scattered showers are expected to develop tonight in western and northern parts of the corn belt, according to DTN Meteorlogix. Wednesday is expected to be mostly dry, with scattered showers and thunderstorms in west, central and northern areas of the corn belt.