Corn market has hard time holding gains

May 07, 2008

Corn Commentary by Jim Riley

The corn market reacted differently on Tuesday on to the wet weather and delayed planting as the corn market closed 10-12 higher, but well off the highs. The corn market was 25-30 cents higher at one point in the session, but it couldn’t hold the gains as traders took profit as the day progressed. The corn market has had a hard time holding gains the last couple of weeks as traders/farmers get worried about getting corn in the ground, but then they realize you can’t kill the corn crop in April/May. Farmers aren’t worried enough that they are planting corn in mud, but many farmers I have talked to across the country are planting corn in marginal ground that in years past they would have waited to plant and that is the good fields. The outside markets were also supportive of corn as the crude oil and metal markets all surged with crude oil up another $2.00. The weather forecast is calling for continued rain and t-storms across most of the Midwest that will slow planting and delay some farmers from getting into the fields. Long range forecasts are more conducive to planting corn, but it may be too little too late. Traders/speculators are also worried about the political backlash of the ethanol mandates as it seems like daily we have a politician, not from the Midwest, going on TV and saying we need to get rid of ethanol rebates. Volume was good at over 300,000 contracts and funds bot 6,000+ contracts on the day.

Overnight, corn was higher, but closed off the highs about 3-4 higher. That sounds like a broken record, but that seems to be the theme in the corn market right now until we have a breakout of the recent trading range. Export sales will be released tomorrow morning and will probably be lighter than expected. The US$ is much stronger this morning and that will weigh on the grain markets because it makes US exports less competitive. The corn market today should see a continued choppy trade with the market opening higher, but it will probably have trouble rallying. I don’t think there is any doubt we are going to get the corn in the ground, it is just late and traders are worried about yield reductions, but you won’t know until the end of the summer. Now, if we get the hot/dry weather at a bad time during pollination that could really accelerate the corn market. This is the first time in the last couple of years that farmers have had trouble getting crops into the ground. The corn market is called to open higher, but calls will be determined much closer to the opening as the calls have changed in the last 3-5 min the last couple of days. Current condition tell you to trade the ranges and make the market break out and prove you wrong.

Globex Overnight

Contract Last Net Change High Low

ZCK8 601^0 6^2 602^6 599^4

ZCN8 609^6 3^4 615^0 606^2

ZCU8 619^6 3^6 624^2 616^0

ZCZ8 627^0 3^4 632^6 623^4

ZCH9 637^6 3^4 642^4 634^2

Early Opening Calls: 3-5 cents better