U.S. corn futures are expected to start near record highs Monday due to increasing concerns that cool, wet weather will disrupt planting in key areas of the Midwest.
Traders and analysts predict corn for May delivery, the most-actively traded contract, will open 1 to 3 cents a bushel higher at the Chicago Board of Trade. In overnight electronic trading, the contract ended up 1 3/4 cent, or 0.2%, to $7.69 3/4 after reaching an all-time high of $7.83 3/4 a bushel.
Traders are nervous about planting progress as episodes of rain, thunderstorms and snow are expected to keep spring fieldwork slow in the Midwest this week. The weather pattern "will continue to feature additional threats of severe weather during the 10-day period," meteorologists at private weather firm Telvent DTN said.
Market participants are worried farmers will plant fewer acres of corn if they are unable to sow the crop in a timely manner. Also, late-planted corn often produces less grain than a crop sown during the ideal planting window. Farmers need to produce a large crop this year to replenish inventories, which are expected to reach a 15-year low by the end of the marketing year on Aug. 31.
"We expect wet, cool weather to persist throughout April in the Midwest, likely postponing corn plantings or shifting acreage to later-planted soybeans," Susquehanna International Group told clients in a note.
Concerns about tight supplies have increased since the U.S. Department of Agriculture said March 31 that inventories as of March 1 were down 15% from a year earlier, a bigger drop than traders expected. Futures prices have rallied to record highs since then. Prices touched fresh highs overnight after the government on Friday left its forecast for end-of-season supplies unchanged from the previous month, raising fears federal forecasters thought inventories had already dropped to a precariously low level.
Futures prices have more than doubled since last summer as supplies have dwindled on strong foreign demand, record U.S. ethanol output and steady buying by livestock producers who use corn to feed animals. Prices will continue to rise until demand eases, analysts said.
Traders project farmers will not be able to significantly rebuild inventories during the next crop year due to strong demand, particularly if poor weather hinders planting or crop development. The next harvest will start in late summer and continue through the autumn.
The USDA, in a weekly crop-progress report Monday, is expected to issue its first estimate of the year on what percentage of the corn crop has been planted. Traders estimate sowing will be about 4% to 6% complete.
"We expect corn prices to ebb and flow with the rate of planting progress through early June when corn planting is completed," according to Susquehanna.
Yet, weakness in crude oil futures and profit-taking after the recent rally could hang over the corn market, traders said. Corn is linked to crude oil because ethanol can be made from corn.