May 13, 2009

 

CBOT Corn Review on Tuesday: Climbs on new crop carryout, crop worries

 

 

A bullish government supply-and-demand report and ongoing delays in the eastern U.S. corn belt pushed the Chicago Board of Trade higher Tuesday.

 

May corn ended up 6 cents to US$4.19 1/2 a bushel, July corn ended up 6 1/4 cents to US$4.27 1/2, and December corn ended up 7 3/4 cents to US$4.48.

 

Traders and analysts found several supportive elements in the U.S. Department of Agriculture's supply-and-demand report and in particular said the 2009-10 ending-stocks estimate of 1.145 billion bushels was bullish.

 

"We still have a long summer in front of us before we can get too excited about the carryout next year, but it will put a scare into some of the bears that felt we couldn't rally corn significantly," Linn Group analyst Jim Riley said in a market commentary.

 

Traders and analysts speculated that in the end, new crop carryout could drop even further, below 1 billion bushels. Many expect cuts in planted acreage this year and further cuts in the yield below the projected yield of 155.4 bushels an acre.

 

Traders also noted a projected 350 million-bushel increase in corn demand for ethanol in 2009-10, a 50 million-bushel increase in exports and tight world supplies as bullish aspects of the report.

 

Some traders and analysts said the report was not very different from expectations, however, and that planting delays were a key factor in Tuesday's gains.

 

"Not that the reports were so friendly, but when you combine that with 10% planted in Illinois and Indiana, you've got to have some concerns out here," said Mark Gold, managing partner for Top Third Ag Marketing.

 

Monday's USDA crop progress report highlighted that the crop is far behind in the eastern corn belt. Forecasts call for enough rain over the next several days to continue keeping farmers out of the fields, traders said.

 

On a continuation chart, corn moved above its 200-day moving average for the first time since Sept. 24.

 

A trader said that Tuesday's USDA report did raise the possibility that a large wheat crop will put excess feed wheat on the market once again this year, damping corn demand.

 

Traders and analysts added that farmers sold the rally, limiting upside movement and making for high-volume trade.

 

Corn basis, or the difference between cash and futures prices, was "in a total collapse" Tuesday, said Iowa commodity trade adviser Karl Setzer. He said it's possible that nearly all of the gains in the corn futures market could be erased by the weak basis.

 

CBOT oats futures ended higher. July oats ended up 3 cents to US$2.35 1/2 a bushel and December oats ended up 2 1/2 cents to US$2.56. The USDA's supply-and-demand report Tuesday projected U.S. ending stocks for 2009-10 of 69 million bushels, down from this year's estimated ending stocks of 72 million bushels.

 

Ethanol futures were lower. June ethanol was up US$0.03 to US$1.721 a gallon and July ethanol was up US$0.025 to US$1.725.