Riley: Corn market rallies.

May 01, 2008

Corn Commentary by Jim Riley

The corn market rallied on Wednesday after we saw the reversal sell off on Tuesday as traders seemed to be worried about the continued cold/wet forecast lasting through next week delaying planting even further. The July and December contracts both closed up near the highs of the day up 6-7 cents after a relatively quiet day of trading. Weather remains the key issue for farmers as they are trying to plant corn, but seem to have to look for fields that are fit to plant. Traders pointed to fund liquidation on Tuesday and the market responded higher after the selling disappeared. Weather remains the focus and it looks like it could be a tough year to get corn in the ground after a couple of years of easy going for the farmer. With increased technology, farmers can plant a lot more acres today than they could in the past, but they still need the weather to cooperate. Traders also starting to talk about the US are not going to be able to plant more than the 86 mil acres the USDA forecast back in March. After the USDA released their acreage estimate, the general consensus was that more acres would be planted, but that is probably not possible now. Also, traders talking about a reduction in the national yield average as we get farther and farther behind in acres planted. If both of these things happen, everybody will have to really look at their supply/demand tables again. Volume was moderate at a 309,000 contracts and funds were net buyers of 7,000 contracts.

Overnight, the corn market was higher again as the weather forecast continues to show cold/wet weather for the next week or so and the demand for corn remains strong. Weekly export sales were released this morning, a little weaker than expected. Trade estimates were between 650,000 and 900,00 and actual sales were 596,000. This number is a little disappointing, but still a strong number considering the high price of corn. Traders will probably forget about the export sales this morning after the 1^st couple of minutes trading. Traders will have some windows to plant corn over the next week, but the windows will be small for most areas. Farmers that I have been talking to that are planting continue to talk about having to search for fields that they just can’t “go” and plant anywhere they want. Just having to move around to plant is taking more time than normal, but they are getting corn in the ground. The outside markets are under pressure this morning and with the lack of new news, that may put some pressure on the grain markets, but the weather should keep them from a general sell off. Gold, silver and crude were all much higher early last night but by this morning all were lower and making new lows. The US$ is up making new highs this morning after failing yesterday after the Fed rate announcement. Regardless of what the mainstream press is saying about blaming ethanol for the high grain prices, a weaker US$ is just as much to blame as the huge increase in demand. The opening calls will be higher this morning in-line with the close overnight, but with the weaker outside markets and stronger dollar, grains could come under pressure today, especially if the weather premium is already built into the price.

Globex Overnight

Contract Last Net Change High Low

ZCK8 606^2 6^0 606^4 602^0

ZCN8 616^2 4^0 618^6 613^6

ZCU8 627^0 5^2 628^4 622^0

ZCZ8 632^4 4^2 634^6 629^4

ZCH9 643^0 7^6 643^0 636^4

Early Opening Calls: 3-5 cents better