Views on commodities and energy
Chicago Board of Trade corn to test lows on easing frost threat
U.S. grain markets look poised for a week of consolidation with a bias toward moving lower in corn and wheat after a weak futures close last Friday and a decent crop weather forecast for the Midwest.
Prices could get a bump if a near-term threat of a crop-killing frost materializes.
“Despite the volatility in the weather forecast, the evidence seems to be building that we are going to get frost-free growing weather into early October,” said Rich Feltes, senior vice president of MF Global Research.
That view fed selling on Friday in corn, the biggest U.S. grain crop, with confidence growing that corn yields could be unprecedented. The U.S. Department of Agriculture on Sept. 11, forecast U.S. corn yields would average a record 161.9 bushels per acre. That equates to a 12.954-billion-bushel corn crop, nearing the record high of 13.1 billion harvested in 2007.
Since the USDA forecast, warm, sunny days have given late-maturing crops time to ripen and build yields. Based on the USDA’s last weekly crop update on Sept. 14, up to 20 percent of U.S. row crops were seen still at risk of being damaged by a freeze. Chicago grain prices surged after that update and when a freeze was also forecast for last week.
But by Friday, the markets had calmed as the weather forecasting models backed off the freeze threat and sentiment on the Chicago Board of Trade floor returned to ideas of an average U.S. corn yield as high as 165 bushels per acre.
If some of the lagging states like Illinois, Indiana and North Dakota make it without a frost over the next two weeks, analysts said, yields could grow another two to three bushels an acre. That would relieve any remaining worries about shortages of corn for ethanol producers, livestock producers or exporters for the next year or so.
CBOT corn futures for December delivery fell below a key chart support level of $3.20 late Friday, setting a bearish tone for the week ahead.
“We really thought it was going to hold $3.20. The market has factored in absolutely zero freeze,” one CBOT broker said.
Traders were now eyeing $3 as key support in December corn. The life-of-contract low is $3.02 and that level could be breached if the heartland has another week of warm weather.
CORN, WHEAT MORE VULNERABLE THAN SOY
“My mode is to still sell rallies in corn and wheat, whereas soybeans … the big unknown here is whether or not the U.S. farmer is going to give us the quantity of beans that we need to meet this record fall export demand program,” Feltes said.
A weak dollar, which hit the lowest level in a year versus the euro on Friday, kept export demand for U.S. soybeans strong. U.S. export bookings for the marketing year that began Sept. 1, reached 17.6 million tonnes as of Sept. 10 — almost double last year’s pace of 9.6 million. China, the top U.S. customer, has bought 10.8 million tonnes, more than double its total for the same period a year ago. China remained active last week, booking another five cargoes of soybeans, or 303,000 tonnes.
As if to underscore China’s needs — and muscle — that interest came despite a trade dispute between China and the United States that erupted this month after U.S. President Barack Obama slapped a tariff on tire imports from China.
Additionally, traders cited supply concerns with U.S. stockpiles at a 32-year low before harvest. There were rising concerns about delays to soy harvest in the Mississippi Delta area. Rains have been relentless over the past 10 days. Greenville, Mississippi, received nearly 7 inches of rain since Sept. 8, more than 5 inches more than normal for the period, said Mike Palmerino, an agricultural meteorologist with DTN Meteorlogix said Friday.
For the week, the benchmark CBOT November soybean contract <SX9> rose 4 percent to $9.41 a bushel. December corn was basically unchanged, ending at $3.18, while December wheat <WZ9> fell 2 percent to $4.57-1/4 per bushel.
PHOTO: Active U.S. harvest nears as soybeans turn golden. Illnois soybean field near the Wisconsin border taken Sept. 19 by Christine Stebbins