July 30, 2008
US corn futures jump as temperatures rise; crude drops
Corn futures jumped Tuesday (July 29) as market participants fretted about weekend weather in the US Midwest that could potentially stress the crop and buyers rushed to take advantage of a recent $2 drop in prices.
Chicago Board of Trade September corn closed up 12 cents to $5.94 per bushel, and December corn closed up 12 ¼ cents to $6.13 ½.
Prices peaked near $8 a bushel in late June due to flooding in key Midwestern corn-growing states like Iowa and Illinois, but have since pulled back because weather has been favourable for the development of the crop.
Forecasts calling for high temperatures in the Midwest this weekend sent prices higher Tuesday, as adverse weather while the crop is pollinating can crimp yield potential.
The heat and humidity aren't expected to prevail in the long term, said Drew Lerner, an agricultural meteorologist at World Weather Inc.
"We shouldn't have more than just a few days of stressful conditions in the eastern part of the Corn Belt," he said.
End-users of corn, such as ethanol plants or livestock producers, also made the move to buy corn as a recent sale of corn to Japan was a sign of increased export demand for the grain.
Some analysts see today's gains as recognition that corn still faces many hurdles, including risks emanating from a late-growing season and the potential for an early frost.
"End-users want to get some coverage in there in case (weather) becomes a problem further down the road," said Arlan Suderman, an analyst for Farm Futures. "They realize from the June rally what it could end up being if there is a bullish surprise out there."
Signs of weakening demand for gasoline and other energy products sent crude oil futures tumbling again Tuesday. New York Mercantile Exchange September crude oil fell $2.54 to $122.19 a barrel. Futures have now fallen 16 percent from the all-time settlement high of $145.29 a barrel, hit on July 3. The sell-off has been driven by fears that the US economic downturn would be longer and deeper than first thought, destroying demand for gasoline and other energy products. In the latest sign of this trend, US gasoline demand, measured by purchases at the pump, fell 4 percent for the week ended July 25 from a year ago, the 14th straight decline, according to a report by MasterCard Advisors LLC, a division of MasterCard Inc (MA) released Tuesday.
