August 9, 2004

 

 

Corn Futures May Rise as U.S. Export Sales Grow

 

Corn prices in Chicago may rise for a second straight week on expectations demand for U.S. exports will increase, easing concern about a record crop, a Bloomberg survey showed. Soybeans, the second-largest U.S. crop after corn, may fall for a seventh straight week.

 

Ten of 15 farm advisers, grain merchants, traders and fund managers surveyed Friday recommended buying corn because demand is improving after prices reached a nine-month low July 30. Six of 11 in the survey urged selling soybeans because rains forecast for this week will improve pod development.

 

Corn is "cheap, cheap, cheap'' after falling 31 percent from a seven-year high in April, said Dave Marshall, a grain merchandiser for AgriPride FS Inc. in Nashville, Illinois. "It doesn't mean export demand is set to explode, but it won't collapse as some have feared.''

 

Corn for December delivery rose 11.25 cents, or 5 percent, to $2.3675 a bushel last week on the Chicago Board of Trade, the first weekly gain in six weeks and the highest closing price in three weeks.

 

Corn export sales rose 24 percent to 470,600 metric tons in the week ended July 29, and shippers reported selling another 645,600 tons for delivery in the marketing year starting Sept. 1, the U.S. Department of Agriculture said Thursday.

 

The dollar plunged against most currencies Friday after U.S. employers last month hired the fewest workers since December, raising speculation the Federal Reserve will skip an increase in its interest-rate target at one of its meetings this year. The dollar index, a gauge of the dollar's value against 6 major currencies, had its biggest drop on Friday since January 20.

 

Low Prices

 

Based on the 19-year weekly average of futures prices in Chicago priced in terms of the dollar index, corn prices are about 40 cents below average, Marshall said.

 

Improving corn prices "and a pickup in exports are positive developments,'' said Chad Henderson, a grain analyst for the Stewart Peterson Group in West Bend, Wisconsin. "I would not be surprised to see December corn rally'' another 15 to 20 cents, Henderson said.

 

Some respondents were reluctant to speculate about prices until after the U.S. Department of Agriculture releases its estimates Aug. 12 for production and forecast for supply and demand. Farmers are expected to reap record corn and soybean harvests.

 

"Most people will wait until Thursday before taking new positions,'' AgriPride's Marshall said. "As the crop begins to mature, you start to see more of the blemishes.''

 

Rising Production

 

Corn production probably will rise 6.5 percent to 10.776 billion bushels, 1.3 percent more than was forecast last month by the U.S. Department of Agriculture, according to the average estimate of 18 analysts surveyed.

 

Expectations for a record soybean harvest have left soybean prices 47 percent below a 15-year high reached in April. Soybeans for November delivery fell 1.3 percent to $5.6175 a bushel last week in Chicago. The soybean harvest will be 22 percent larger at 2.959 billion bushels, the Department of Agriculture said.

 

Crop conditions improved in June and July as temperatures averaged as much as 4 degrees Fahrenheit below normal and rains were as much as 25 percent above normal, the National Climate Prediction Center said.

 

The crop conditions probably held steady last week as up to 2 inches of rain fell from Nebraska to Ohio, said Greg Wagner, risk management specialist for E-Hedger LLC in Chicago. Cool weather probably slowed corn and soybean development and may increase instances of disease and the chance for frost damage in September, Wagner said.

 

Harvest Expectations

 

"It's a good crop, but not as big as everyone expects,'' Wagner said. "We've lifted all our hedges and believe both markets are bottoming because of the crop problems'' farmers are finding after scouting their fields, Wagner said.

 

The condition of the corn crop is the best for this time of year in a decade. An estimated 76 percent was rated in good or excellent condition as of Aug. 1, the U.S. Department of Agriculture said Aug. 2. Conditions declined for the first time since the last week of May with seven of the top 18 producing states reporting a decline.

 

The percentage of the soybean crop rated good or excellent improved for the sixth consecutive week, rising one percentage point to 70 percent as of Aug. 1, and was the highest for that date since 1994, when U.S. yields were a record, government figures show.

 

Ahead of Average

 

An estimated 49 percent of the soybean crop was setting pods compared with 32 percent at the same time last year and 46 percent on average the last five years, government figures showed. Crop development slowed this week with Minnesota, North Dakota and South Dakota reported behind the five-year average.

 

Those three states produced 18 percent of the crop in 2003 and temperatures as much as 6 degrees Fahrenheit below average this week may delay development further, increasing the risk of yield losses from an early frost in September.

 

Cool, wet weather in July and early August almost doubles the chances for an early frost, said Mike Palmerino, a forecaster for Meteorlogix LLC in Lexington, Massachusetts. There is a 10 percent to 15 percent chance for an early freeze every year, and the cool air pooling in Canada this summer increases the risk to as much as 25 percent, Palmerino said.

 

"Sell soybeans because all this talk about a damaging freeze may not matter'' because wet soil may help protect the plants from frost damage, said Gregg Hunt, a grain analyst for Fox Investments Inc. in Chicago. "Farmers didn't sell enough grain when prices were higher and those soybeans will keep hitting the market on rallies.''

 

Corn is the biggest crop, valued at $24.8 billion last year, and soybeans were second at $17.5 billion.