May 16, 2007

 

CBOT Corn Review on Tuesday: Higher; crop concerns attract buyers

 

 

Chicago Board of Trade corn futures settled higher Tuesday, rallying to one-week highs as the uncertainties of a long growing season and technical strength attracted speculative buyers, analysts said.

 

July corn ended 8 1/4 cents higher at US$3.71 1/2, and December finished 7 1/2 cents higher at US$3.78 1/2.

 

The market remains sensitive to real and perceived threats to the crop, in a year when record production is counted on to meet expanding demand needs, said Shawn McCambridge, senior grains analyst with Prudential Financial in Chicago.

 

"The market has crossed the first obstacle of getting the crop in the ground, but with a long growing season ahead and private forecasts talking up hot, dry Midwest summer weather, speculative buyers continue to emerge on real or perceived threats to the crop," he added.

 

Technical buying played a role in the gains as well, with the failure of the market to challenge last week's lows and a fair amount of commercial interest resting beneath the market producing buying opportunities, traders said.

 

Nevertheless, the corn balance sheet does not have enough of a cushion to absorb any crop threat, and that should keep a floor under prices moving forward, McCambridge added.

 

Meanwhile, the DTN Meteorlogix forecast said a cool front crossing the Plains and Midwest will be a rain-maker for much of the primary U.S. crop areas during the next couple days. A swath of rain totaling up to one inch in the western Midwest Tuesday, running from Kansas northeast to Lake Superior is expected. This shower belt will move east into the eastern Midwest Tuesday night and Wednesday. The overall impact of the rains will be positive for emerging crops. Temperatures will turn cooler as well across the central U.S. during the balance of this week.

 

Weather forecast models continue to show a storm system developing for the central U.S. during next week. However, the latest outlook is for heavier rains in the western Midwest, with near to above-normal rainfall for this time of the year, and normal to below-normal rainfall in the eastern Midwest, according to Meteorlogix.

 

Temperatures across the entire corn belt will be normal to above normal, the agency forecast. This is not as promising an outlook for follow-up rain in Illinois, Indiana and Ohio, where the first half of May has been dry.

 

The impact of this less-than-desirable moisture pattern does not look to be critical at this point, but a lack of rainfall during what is normally one of the wettest months of the year is concerning with much of the growing season still ahead, Meteorlogix reports.

 

In pit trades, JP Morgan bought 500 July and 500 December, Fimat bought 300 July and 300 December. JP Morgan sold 300 July and 600 September, Fimat sold 800 July, and Tenco and Rosenthal each sold 300 December. Speculative fund buying was estimated at 5,000 contracts.

 

CBOT oat futures shook off early weakness as corn moved into positive territory, a floor trader said. July ended up 1 1/2 cents at US$2.57 1/2, and December settled up 2 1/4 cents at US$2.51 3/4.

 

Ethanol futures finished mixed. June slipped US$0.010 to US$2.155 per gallon, and July rose US$0.008 to US$2.113.