Corn rally continues on Argentina worries
U.S. corn futures hit a fresh 29-month high in overnight trade and are expected to open higher Wednesday thanks to ongoing concerns about the South American crop.
Chicago Board of Trade futures are called 4 to 6 cents higher. In overnight trade, corn for March delivery was up 4 1/4 cents, or 0.7% to $6.06 1/2 per bushel
Front-month corn topped its November bull market high of $6.05 in overnight trade, reaching its highest price since July 18, 2008.
A main driver of the gains has been dry, hot weather in Argentina, a key corn producer. The drought-like conditions during pollination could hurt yields, analysts say, tightening an already tight world balance sheet.
South American weather will remain a focus of the market. Traders are also watching for signs that export demand is waning as prices climb above $6.
Many traders are expecting that China will start buying U.S. corn early next year, which is helping keep a floor under the market, said Mike Zuzolo, president of Global Commodity Analytics and Consulting.
Also supporting prices is the concern that U.S. farmers won't plant enough corn acreage in 2011 to stabilize world supplies. While analysts widely expect farmers to increase their plantings from 2010 because of higher prices, other crops, including soybeans and cotton, are also much higher, giving farmers other options as well.
A weaker dollar Wednesday should add support for corn and commodities generally, analysts said.
Technically, the market's new high overnight reinforces the upward trend, but Zuzolo and other analysts said traders are more focused on the March contract's November high of $6.17 1/2.
"I think it means more once we come back from the holiday because of the low volume," Zuzolo said of the overnight high. Volume is declining ahead of the Christmas holiday. The market will be closed Friday.
There are a few "near-term caution flags," for market bulls, Rich Feltes, analyst with R.J. O'Brien, including the potential for fund-selling and the fact that "everyone is bullish."
"Thus far, however, shrinking (Argentina) row crops are overcoming caution flags outlined above," Feltes said.
-By Ian Berry, Dow Jones Newswires; 312-750-4072; firstname.lastname@example.org
(END) Dow Jones Newswires
December 22, 2010 09:46 ET (14:46 GMT)
Copyright (c) 2010 Dow Jones Company, Inc.