June 6, 2008

 

CBOT Corn Review on Thursday: Soars to new highs on crop concerns

 

 

Crop concerns and outside markets propelled Chicago Board of Trade corn futures to all-time highs Thursday, pushing prices outside of a two-month-old trading range.

 

July corn was up 28 3/4 cents to US$6.43 1/4 per bushel, ending just off the all-time high of US$6.43 3/4. September corn was up 28 1/4 cents to US$6.56 and December corn was up 27 3/4 cents to US$6.70. September and December also settled near their highs, which were new contract highs.

 

Heavy rains throughout the U.S. Midwest are causing replantings and making it likely that total corn acreage will drop, analysts said. The replantings also cause yields to drop, analysts say, because farmers must use seeds with a shorter growing season.

 

The situation has caught the attention of U.S. Department of Agriculture Secretary Ed Schafer, who said Thursday this year's corn crop is being watched closely out of concern that unusually wet weather could impact production.

 

"We're monitoring the weather closely," Schafer told reporters. "We've got a lot of concerns on the wet conditions in corn country and how that's affecting the crop and certainly the maturity of the crop."

 

Shafer's comments further fueled the corn market, which was already rallying, traders said.

 

"When it gets his blessing, that's got to get your attention," an analyst said.

 

Sid Love, an analyst with Kropf and Love Consulting, said the stakes are high for this year's crop due to already tight supplies and historically high prices.

 

"You could be at US$4.50 or US$7.50 depending on the crop," Love said. "It's a huge thing."

 

July corn had been mostly trading between US$5.80 and US$6.20 for more than two months. A trader said buyers were encouraged by the break through that range, which likely uncovered buy stops. Funds bought 9,000 contracts.

 

"New contract highs are important because they always bring more money into the market," a trader said.

 

Strong crude oil and a weaker dollar were also important factors in the rally, traders said.

 

The U.S. Department of Agriculture announced export sales of 702,400 metric tonnes for the week ended May 29, compared to 703,400 metric tonnes the prior week. Analysts projected sales between 400,000 and 850,000 metric tonnes.

 

CBOT oats futures rose sharply on spillover support from outside markets and heavy fund-buying, a trader said. "The funds just kept coming and coming," he said. July oats were up 18 cents to US$4.04 per bushel, September oats were up 17 3/4 to US$4.15 3/4 per bushel and December oats were up 17 1/2 cents to US$4.30 1/2. The daily trading limit is 20 cents.

 

Ethanol futures closed higher. July ethanol was up US$0.059 to US$2.333 per gallon, and December ethanol was up US$0.045 to US$2.375.

 

In international news, European Union licenses to import corn rose 292,000 metric tonnes in the week ended Tuesday, adding onto the surge in feed grain imports seen earlier in the 2007-08 campaign, E.U. data showed Thursday.