June 3, 2008

 

CBOT Corn Review on Monday: Higher on weather, crop concerns

 

 

Chicago Board of Trade corn futures ended higher Monday, climbing on weather and crop concerns and showing strength even after crude oil prices retreated, traders said.

 

July corn was up 16 1/2 cents to US$6.15 3/4, September corn was up 16 1/2 cents to US$6.29 and December corn was up 16 3/4 cents to US$6.43 1/4.

 

Prices rallied on growing concern about the condition of the crop. Late emergence could lead to yield reductions as the crop pollinates during peak summer heat, and recent heavy rains are causing some farmers to either replant or switch to soybeans, analysts said.

 

"Supplies are going to be real tight given what's been planted," said Bob Haberkorn, senior market strategist for Lind-Waldock.

 

Traders and analysts anticipated Monday afternoon's crop progress report will show between 50% and 65% of the crop was in good-to-excellent condition. The long-range average is 66 1/2%, and last year's figure was 78%, analysts said.

 

Traders say "rain makes grain" once the crop is planted, but recent rainfall has been too plentiful in some areas, flooding fields and causing more farmers to have to replant, Haberkorn said. Parts of the southern corn belt and Iowa and Nebraska have been hit particularly hard. Analysts say an unusually cool May across the Midwest also hindered crop emergence, which depends on warm weather.

 

Warmer weather this week is expected, but Mike Tannura, a meteorologist with T-storm weather, forecasts widespread heavy rainfall in the corn belt this week, as thunderstorms throughout the week dump 1.5 to 3 inches in most areas. He said unusually moist soils could continue to feed thunderstorms in the Midwest in a pattern that could last through the month.

 

Outside markets, including higher crude oil and a weaker dollar, supported corn early in the day, but corn remained firm even after crude trimmed its gains, a trader noted.

 

Corn prices broke through several technical points during the day, a trader said, and July corn closed at a three-week high.

 

News that the CFTC plans to announce policy changes this week to address rising food costs could prove to be bearish, traders said, but they added the market was reacting cautiously until more specifics emerge.

 

A trader said the market is in "a transitional phase," as traders wait to see if crude oil hit its peak and the dollar reached its low. If that's the case, corn and other commodities will plummet, he said.

 

Haberkorn said the fundamentals for corn are still strong, and he predicts December corn will hit US$7.20.

 

CBOT oats futures ended lower as traders rolled over from July into September contracts, a trader said. July oats were down 4 cents to US$3.78, September oats were down 4 1/4 cents to 3.89 3/4 and December oats were down 4 cents to US$4.06.

 

Ethanol futures ended higher. June ethanol was up US$0.014 to US$2.405 and July was up US$0.002 to US$2.400.