U.S. Corn Outlook Downgraded Again

The outlook for the corn crop in the United States was downwardly revised again by the U.S. Department of Agriculture, as the price of corn traded at a record $8.49 a bushel on Friday, with investors taking profits on Monday, as prices pulled back to $7.89 a bushel on the Chicago Board of Trade for December delivery.

For the year, corn is estimated to come in at 10.8 billion bushels, down 13 percent from the 2011 yield. The average yield per acre is expected to be at 123.4 bushels, the lowest level since 1995.

Next growing season has also drawn concern, as the drought could continue on through the latter part of October, resulting in the depletion of water and further soil damage.

José Graziano da Silva, director general of the FAO, called upon the United States to suspend the foolish (our words) federal ethanol mandate which takes 40 percent of the domestic corn crop and wastes it as fuel.

The price of corn could reach from $9 a bushel, all the way up to $10 a bushel, depending upon the actual amount of corn that is produced, which has yet to actually be determined.

U.S. Corn Prices Approaching All-Time High

In Friday morning trading, corn futures jumped again, closing in on an all-time high for U.S. corn, as rising demand in Asia and a destructive drought continue to wreak havoc on the sector.

Weather forecasts were part of the boost in corn price, as they projected rising temperatures and little rain in key corn-growing areas.

Consequently, the condition of the corn will continue to deteriorate, with a growing percentage reaching the point of no return, as some farmers have already began to plow their corn under.

The only good news is the light rains could slow down some deterioration, extending slightly the time frame the corn needs for significant rains to salvage the season. It stands now at less than two weeks before it could become an extraordinary disaster if rains to come in the amounts the corn crop needs.

On the Chicago Board of Trade, the front-month July corn contract jumped to $7.92 a bushel, rising 20-3/4 cents. That's just below the all-time high of $7.99-3/4 a bushel.

Corn for December delivery on the CBOT rose to $7.45-1/4 a bushel, gaining 13 cents, at 8:20 AM CDT.

Price for the new crop contract have soared close to 48 percent over the last month, climbing 18 percent already for July.

If the drought continues, soybeans, which pollinate later than corn, could be the next victim of the drought if weather patterns don't change soon.

Soybeans and wheat continue to rise in price as well, with concerns over the effects of the drought on soybeans if it continues, and expectations wheat demand will rise as corn prices continue to soar.

Corn Futures Rise for Fourth Straight Week

Corn futures in Chicago rose for the fourth week in a row as the drought in the Midwest continues to devastate the corn crop. Weather projections hold out little relief for the key corn production areas of the region.

Corn for December delivery on the Chicago Board of Trade climbed to $7.47 a bushel, up 2 percent, as of 2:00 PM London.

Since the middle of June corn prices have soared 48 percent, and have already jumped 18 percent in July.

According to the National Drought Mitigation Center, parts of the Midwest which stood at 53 percent moderate to extreme drought last week, have grown to 63 percent as of July 10.

As for corn ratings, every day the drought continues, the quality of the corn drops by a little over 1 percent.

This week the U.S. Department of Agriculture slashed its corn yield estimates to 12.97 billion bushels, down significantly from June's estimate of 14.79 bushels. That will be significantly downwardly revised if the weather patterns hold.

Globally, in June the corn yields for 2012 were cut from 949.9 million tons to 905.2 million tons.

Corn Prices Jump on Weather Forecast

The price of corn continues to soar as the latest weather forecast offers little hope of rain any time soon for the important Midwest area, especially in Iowa and Illinois, which together account for about 30 percent of the corn yield in the United States.

Since the middle of June corn prices have jumped 30 percent, and could soar much higher as rains aren't expected for over a week in the eastern portion of the Midwest states, with extended forecasts projecting the middle of next week as the earliest time for rain to come to the region.

The rain that is forecast for the nation is mostly for the southern states, offering no relief for the corn states.

Consequently, on the Chicago Board of Trade (CBOT) prices for new-crop corn climbed another 3 percent to a contract high.

In Asian trade front-month corn jumped to as high as $7.59-3/4 a bushel.

U.S. Corn Prices Schizophrenic on Drought, Economy

The price of corn futures went up and down the last several days as disparate forces pressure the grain from different sides.

First there is the force pushing the price of corn down, which is the ongoing global recession, which has been trying to pull the price of corn to lower levels.

Countering that is the continuing drought, which is now expected to last into July in some important parts of the country, which has turned a number of traders bullish on it.

Around the world the global economy has been floundering, as China reported another decline in its manufacturing sector, the eighth straight month for them. Europe's economy has dropped for the fifth month in a row, and U.S. manufacturing is growing at a declining pace.

So the price of corn in the U.S. is largely based upon this competing influences, where in the short term it appears the weather may have the largest influence; although that has been changes on a daily basis at times.

Another factor that hasn't been taken into account by many is the major corn crop in Brazil’s Mato Grosso state, which could end up boosting the supply glut even more. If so, that would put downward pressure on corn in the near future.

At this time it appears over the next two or three weeks the weather may be the biggest factor in corn futures prices, which means we may see it go up during that time.

Beyond that it's likely the economy and corn production will be the determining factors, which means corn prices will drop as the summer rolls on.

Of course it depends on the weather over time, and whether some important corn production areas in the Midwest get some pockets of rain.

Corn for December climbed to $5.51-1/4 a bushel, jumping $0.23 percent, on the Chicago Board of Trade.

Corn Futures Fall to Earth as Inventory Higher than Analysts' Estimates

Corn farmers got a dose of reality, and analysts egg on their face, as a corn inventory forecast from the government surpasses analysts' estimates.

“People were a little disappointed,” said Greg Grow, of Archer Financial Services Inc. in Chicago. “We had a big rally, so traders are lightening up on some positions.”

With supply being the driving force behind the recent surge in corn futures prices, that pretty much bursts that media-induced bubble, as corn futures dropped 0.3 percent on Friday in response to the news.

On the Chicago Board of Trade corn futures for December delivery fell to $3.9525 a bushel.

Corn prices soared 2.8 percent for the week on speculation the wet weather damaged the crop in the Midwest, because of three times more rain than normal.

Dry Weather in Argentina Pushed Corn Prices Up Slightly

Dry weather in Argentina gave corn prices a boost today, after falling to their lowest level in a month yesterday. Argentina is only second behind the U.S. in exporting of corn.

Projections are the conditions in Argentina will continue, as expectations are that less than 1 inch of rain will fall in the major agricultural regions of Argentina over the next couple of weeks.

Corn responded by moving up as high as $3.695 a bushel on the Chicago Board of Trade in electronic trade, while closing at $3.66-1/2 a bushel.

DJ CBOT Corn Review: Ends Higher On Crude; Unchanged On Week

CHICAGO, Jan 02, 2009 (Dow Jones Commodities News via Comtex) --
By Ian Berry
Of DOW JONES NEWSWIRES

Higher crude oil and short-covering pushed Chicago Board of Trade corn futures higher Friday, as the market extended its rally from Wednesday, traders said.

March corn ended up 5 1/4 cents to $4.12 1/4 per bushel, May corn ended up 5 cents to $4.22 3/4 and July corn ended up 5 cents to $4.33.

The market was a penny or two higher for most of the day and gained a few more cents before the close. It remains firmly above key support at $4 as well as its 50-day moving average at $3.85.

"The market has given a clear indication -- not just corn, but wheat and soybeans -- that the Dec. 5 lows were fairly major," said Joel Karlin, analyst for Western Milling.

Higher crude oil and U.S. stocks set a supportive tone, although there was little fundamental news to boost the market, traders and analysts said. Weekly export sales of 269,900 metric tons were weak, traders added.

Traders and analysts add that the rally from a low of $2.90 in the nearby contract in December has been in light volume, much of it around the holidays. Many expect the market will give back some of its gains once traders return and activity gets back to normal next week.

Karlin said following the Jan. 12 crop report, the market will have "a renewed focus on fundamentals" including prospects for planted acreage this year.

Weak demand across all sectors continues to limit corn's gains, analysts say, and corn's recent gains will only hinder any rebound in demand.

Funds bought an estimated 1,000 contracts. Although the market closed higher for the third straight day, the March contract ended unchanged on the week.

CBOT oats ended slightly higher. March oats ended up 2 cents to $2.12 per bushel, May oats ended up 2 cents to $2.21 1/4 and July oats ended up 2 cents to $2.30 3/4.
Ethanol futures were mixed. January ethanol ended flat at $1.620 per gallon and March ethanol ended up $0.005 to $1.654.

-By Ian Berry, Dow Jones Newswires; 312-341-5778; ian.berry@dowjones.com
(END) Dow Jones Newswires
01-02-09 1543ET
Copyright (c) 2009 Dow Jones & Company, Inc.