June 17, 2011

CBOT corn, wheat slides deeper on crop weather



CBOT corn futures slipped to fresh one-month lows on Thursday (Jun 16) due to improved crop weather in the US and concern that less grain will be used to make ethanol.


Wheat followed suit on news of bumper crops in Russia and Australia, although uncertainty remained over the impact of a recent drought in Europe.


CBOT July corn was down 13 cents, or 1.79 %, to US$7.13¾ a bushel, its lowest since May 17, while wheat for July delivery fell by 1.48% to US$6.98 a bushel. CBOT July soy sagged 1.11% to US$13.52¾ a bushel.


Warm and dry weather is likely to boost crop growth and development in the US Midwest, while showers are expected towards the weekend.


"This should have a positive effect on the growth of corn plants, which are still lagging behind the long-term average somewhat due to planting delays," Germany's Commerzbank said in a research note.


CBOT corn has lost more than 10% since hitting a record high near US$8 a bushel last week, while wheat has shed some 16% from last month's peak of US$8.34-½ a bushel.


The high cost of corn in the cash market has stirred talk that some ethanol refineries might have to be shut down due to falling profit margins. The closures would reduce demand from a sector that uses 40% of the US corn crop.


Commerzbank noted that warm weather may have come too late for the US wheat crop to recover and that the harvest in England was due to come in at 14% below the long-term average.


"We believe the sharp fall in wheat prices is therefore exaggerated and we expect prices to recover soon," it said.


Other analysts were also looking at wheat output in Europe and North America.


"The outlook, until the Northern Hemisphere harvest outturn is known, remains bearish," Bruce Tozer, head of EMEA sales softs and agricultural products at Credit Agricole Corporate and Investment Bank, said.


"Some people think that the rains in the last week have been enough to underpin yields in northern Europe. It's too early to tell; excess rain now might damage quality and raise costs of harvesting," he said.


Benchmark European new crop milling wheat futures were down EUR1.75 (US$2.478), or 0.81%, at EUR213.50 (US$301.9) a tonne in Paris.

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