October 27, 2010

CBOT corn ends higher on wheat rally

US corn futures ended higher Tuesday (Oct 26), supported by a rally in wheat, which climbed on crop concerns.

December Chicago Board of Trade corn closed up 2 1/4 cents, or 0.4%, at US$5.71 a bushel and March corn ended up 2 1/2 cents at US$5.84.

While there is little supportive news in the corn market, both corn and soy will follow wheat higher if the market takes off higher, as many are expecting, Linn Group analyst Jim Riley said. "Wheat can be a streaker," he added.

Wheat and corn are tied together because both are used as feed, and because farmers in much of the Midwest can plant either crop, based on prices.

Wheat was buoyed by poor US crop conditions detailed in a Monday (Oct 25) government report. Riley said the grains and oilseeds markets performed "admirably" given strength in the dollar, which was expected to weigh on commodities.

Traders said an intense storm that blew through the Midwest Tuesday was a nonfactor, as most of the crop is harvested and damage to what remains should not be extensive. While the winds were expected to blow over some of the remaining corn crop, it can still be harvested, Riley said.

The market opened lower Tuesday but quickly rebounded. A "buy the dip" mentality persists among end-users as forecasts prices could climb to US$6 or higher, according to analysts. US supplies are expected to tighten to their lowest level in 15 years in 2011, due in part to a disappointing 2010 crop.

The USDA is likely to trim the Iowa corn crop estimate next month, following a deep cut this month, said Bob Wisner, well-known crop specialist, professor emeritus at Iowa State University.

Yields are down 30-40 bushels an acre from 2009 in the US top corn-growing state, he said.

The USDA will issue new supply and demand estimates November 9. Analysts said the market is likely to trade within a range until then unless some other catalyst - perhaps a rally in wheat - emerges.