U.S. corn futures are expected to open higher Wednesday, bouncing back from sharp losses Tuesday as traders continue to worry about extremely tight supplies.
Chicago Board of Trade futures are expected to open 5 to 7 cents higher. In overnight trade, corn for May delivery was up 5 1/4 cents, or 0.7%, to $7.57 3/4 per bushel.
The rebound follows a 3% plunge on Tuesday that was part of a commodity-wide selloff. But prices remain near all-time highs after setting a new record at $7.83 3/4 per bushel last Thursday, and analysts said Tuesday's drop could encourage "bargain hunting."
The worry is that the U.S. Department of Agriculture's projection last week that 675 million bushels of corn would be left by the end of August was overly optimistic, even though it would be the smallest stockpile in 15 years. Some analysts say the market must continue to climb to choke off demand and prevent supplies from dropping below what is required to maintain pipeline supplies.
In addition to the near-term concerns about dwindling corn supplies this summer, traders are also worried about the potential for a sluggish start to the planting season.
Analysts say the U.S. needs big crops both this year and next to replenish corn stockpiles, and late planting this spring would spark new worries because the crop typically yields better when planted early.
Country Hedging noted that "increasing chances for showers and cool temps will slow planting progress for the remainder of the week."
The market's upside is limited, according to some analysts, by the possibility that livestock producers will cut back sharply on their use of corn and opt for more wheat as well as distillers dried grain, an ethanol byproduct used as feed.
"Traders continue to doubt that logic, however," Farm Futures senior editor Bryce Knorr said in a morning commentary.
The market's drop Tuesday was attributed in part to a note by Goldman Sachs, known for being a commodity bull, recommending clients take profits in commodities, particularly crude oil.