May 29, 2008

 

CBOT Corn Review on Wednesday: Lower on USDA decision to release lands

 

 

Chicago Board of Trade corn futures ended lower Wednesday on the government's decision to open 24 million acres of land for cattle grazing, as well as weather forecasts calling for warmer weather.

 

July corn was down 5 1/2 cents to US$5.92 1/2, September corn was down 5 1/2 cents to US$6.05 1/2, and Dec corn was down 6 cents to US$6.19 1/2.

 

Analysts said the U.S. Department of Agriculture's decision to release the acres from its Conservation Resource Program would likely reduce feed demand for corn, although they disagreed on the extent of the impact.

 

"I think it's more of a psychological hit, in that it shows (the USDA) is committed to taking steps to fight food inflation," said Mike Zuzolo, senior analyst for Risk Management Commodities Inc.

 

A trader said the effect could be mitigated and feed demand could remain strong if cattle ranchers decide the USDA's decision gives them an opportunity to increase their herds.

 

Prices continued to follow crude oil throughout the day, traders said, which helped corn limit its losses. Higher crude oil not only increases production costs, it can spur more demand because it makes ethanol production more economically attractive, analysts said.

 

Weather forecasts calling for warmer temperatures in the 10-day forecast were seen by some as bearish. DTN Meteorlogix forecasts "a warming trend across the central U.S., which will be favorable to row-crop emergence and early growth" for the next several days. The forecast calls for continued chances for rain and severe weather in the north-central U.S.

 

Planted corn needs the warmth to jump-start emergence, analysts say. The USDA reported emergence at 52% as of Sunday, below the average of 76%.

 

Some said the weather wasn't completely bearish, however, because forecasted rainfall will continue to hamper growers who have not completed planting. Planting was 88% complete as of Sunday, compared to a five-year average of 94%, the USDA reported.

 

Zuzolo also said the market was supported by increasing reports of farmers who need to replant because of cool, wet soils, a development that could point to lower yields.

 

CBOT oats ended the day lower amid light trading, a trader said. July oats were down 4 cents to US$3.90 a bushel, September oats were down 4 cents to US$4.01, and December oats were down 4 cents to US$4.18.

 

Ethanol futures ended mixed. June ethanol climbed US$0.013 to US$2.498 per gallon and July ethanol dropped US$0.010 to US$2.455.