August 20, 2008

 

CBOT Corn Outlook on Wednesday: Higher; follow-through, strong commodities

 

 

U.S. corn futures are expected to open 6-8 cents a bushel higher on follow-through buying from Tuesday's rally, weather concerns and expected speculative buying in commodities, traders and analysts said Wednesday.

 

In overnight trade, September corn was up 6 3/4 cents at US$5.71 1/2 and December was 6 cents higher at US$5.90 1/2 a bushel.

 

Corn is expected to uncover spillover support from the rest of the complex, as soybeans are expected to be 18-20 cents higher and wheat is expected to open 7-9 cents a bushel higher, an analyst said.

 

Though prices are expected to remain volatile, concerns over dry conditions and a crop that is lagging in development are expected to keep an undercurrent of support in the market, he said.

 

Higher temperatures this week will benefit the filling corn crop and help it advance toward maturity, though dryness remains a concern in some areas of the Midwest, private forecaster DTN Meteorlogix said.

 

Some showers are in the forecast for Thursday and Friday, but amounts will not likely be enough to ease the concerns.

 

Southern and eastern areas of the western corn belt are forecast to receive showers totaling 0.10-0.75 inch, with heavier amounts expected for northern Missouri and eastern Iowa, Meteorlogix said.

 

The eastern corn belt will see scattered showers over southwestern and western areas, beginning later Wednesday and continuing through Friday. Amounts are expected to total 0.10-0.75 inch, with locally heavier rains in Illinois and Wisconsin. Little rainfall is expected elsewhere in the region.

 

The 2008 Pro Farmer Midwest Crop Tour on Tuesday found strong yield potential in Indiana and smaller yield estimates in Nebraska.

 

The Indiana corn yield was pegged at 163.82 bushels an acre, up from the tour's estimate of 148.17 bushels last year. The U.S. Agriculture Department puts the average yield at 164 bushels. The eastern leg of the tour continues to find improved yield prospects as it travels west.

 

The western leg pegged the Nebraska corn yield at 141.82 bushels, down 3.6% from last year's 147.11 bushels found on the tour. The USDA pegged the yield 2% higher than last year.

 

While crops improved from fields surveyed on Monday, there remains much variability within fields, scouts said.

 

In other news, China's corn prices fell in the week to Wednesday on weakening demand and the government's continuous sales. In addition, environmental protection measures needed to curb pollution during the Olympics have forced many processing plants to cut or halt production.

 

China has ordered 519,500 metric tonnes of corn moved from northeastern producing areas to the southern region of the country to help further control high prices. The reallocation of corn, despite already weakened prices, reveals the government's resolve to control grain prices in order to curb inflation, an analyst said.

 

In other markets, October crude oil is US$1.55 higher at US$116.09 a barrel and December gold is up US$3.50 at US$820.30 an ounce.

 

The U.S. dollar is firmer against the euro and the Japanese yen.