July 31, 2008

 

CBOT Corn Review on Wednesday: Closes up on end-user buying, USDA decision

 

 

Chicago Board of Trade corn futures settled higher Wednesday on continued end-user buying and a government decision Tuesday not to release protected lands to farmers.

 

September corn closed up 7 1/2 cents to US$6.01 1/2 per bushel, December corn closed up 7 3/4 cents to US$6.21 1/4 and March closed up 7 3/4 cents to US$6.41 1/4.

 

A U.S. Department of Agriculture decision handed down Tuesday afternoon to deny farmers early release from Conservation Reserve Program contracts was bullish, traders and analysts said.

 

The CRP encourages farmers to convert highly erodible cropland or other environmentally sensitive acreage to vegetative cover, according to the USDA. Farmers receive an annual rental payment for the term of a multiyear contract.

 

The announcement had even more of an effect on December 2009 contract prices than it did on near-term contracts, traders and analysts said.

 

"The real affect of that USDA and the CRP acreage is showing up in the spreads," said John Kleist, analyst/broker at Allendale.

 

December 2009 prices ended markedly higher than other contracts on fears that the CRP decision would spark a battle for acreage next spring, analysts said. December 2009 corn closed up 19 1/2 cents to US$6.55.

 

Traders and analysts also said end-user using buying continued to support prices.

 

"We're just on the continuation of a correction off the swing lows we saw a week ago," said Kleist. "We found an area where we came to end-user bookings to get some coverage here."

 

Livestock users are continuing to hedge feed while both ethanol producers and exporters are "doing some bookings," he said.

 

Corn also saw support from a climb in crude oil prices later in the trading day, analysts said. Nymex crude oil closed up more than US$4.

 

"The crude oil price is giving us a lift, finally," said Jerry Gidel, grain analyst at North America Risk Management Services.

 

Although providing modest support earlier in the week, U.S. corn belt weather over the weekend is now seen as an uncertain influence, traders and analysts said. Some weather forecasts are predicting above-average heat over the weekend.

 

"For the time being, the jury is up," said Kleist.

 

In some areas across the corn belt, the heat could "mess up pollination a little bit," said Gidel.

 

Still, some analysts say humidity, which is also predicted by many forecasts, could counterbalance above-average temperatures.

 

"That makes up for some sins," said Kleist.