U.S. corn futures rallied Monday, climbing on the potential for weather problems this spring to trim production and acreage prospects.
The dominant issue in the market was weather, as unfavorable conditions for seeding corn in the eastern Midwest and northern plains raised the threat of smaller yield potential, said Don Roose, president of West Des Moines, Iowa based brokerage U.S. Commodities.
"Close to 40% of the U.S. corn crop will be planted later than seeding dates for optimal yield outlooks, opening the door for upwards of 1 bushel an acre loss for crops seeded after May 15," Roose said.
A tight supply scenario in the U.S. places increased pressure on U.S. farmers to produce bumper crops in 2011, with federal forecasters already projecting supply tightness despite farmers planting more acres than a year ago.
Meanwhile, floods in the southern U.S., along the Mississippi River, added further support amid the threat of up to 1 million acres possibly deemed not suitable for planting corn after being submerged from the high river water levels.
After the flood waters recede, farmers may be forced to take preventable planting insurance payments on intended corn acres in the region, as it may provide a more profitable option than seeding crops with a poor yield outlook, said Dan Basse, president AgResource Co in Chicago.
The Army Corp of Engineers have opened some levees, allowing river waters to flood farm lands in the Mississippi Delta in an attempt to curtail flooding in populated southern cities.
Further support was generated from international grain users increasing purchases following recent price declines, with South Korean buyers returning to the U.S. for supplies after making their first major purchases in nearly two months recently.
The U.S. Department of Agriculture announced exporters sold 125,000 metric tons of corn to South Korea for delivery in the 2010-11 marketing year that ends August 31.
However, futures ended off initial highs, as traders took profits on prior gains attributed to broader selling associated with falling crude oil futures.
CBOT July corn settled 15 1/2 cents, or 2.3% higher, at $6.97 1/2 a bushel.
U.S. wheat futures closed higher as poor weather threatens global output. Cool, wet weather is slowing planting in the northern U.S. Plains and Canada, while dryness reduces harvest potential in the southern Plains and Europe. CBOT July wheat gained 8 3/4 cents, or 1.2%, to $7.36 1/2 a bushel; KCBT July rose 6 1/2c, or 0.7%, to $8.76 and MGE July jumped 10 cents, or 1.1%, to $9.10 1/4.
U.S. soybean futures ended lower, retreating from earlier advances on late slide in crude oil and corn fading from sharp gains. The market did not have the demand to sustain an upward price push, with slower export and domestic demand amid increased competition from record South American crops in international markets limiting advances, said ebottrading.com analyst John Kleist. CBOT July soybeans finished down 0.2%, or 3 cents, at $13.26 1/2 a bushel.
CBOT July soyoil ended down 0.4% at 55.91 cents/pound, while July soymeal settled 0.1% higher, at $345.70/short ton. U.S. rice futures finish higher with corn and wheat, as the grains strengthen on weather worries. CBOT July rice ends up 12 cents, at $14.10 1/2 per hundredweight.
Ethanol futures advanced as corn rallied, with the July contract rising 3 cents, or 1.2%, to $2.534 a gallon. Oat futures strengthened on concerns about cool, wet weather preventing farmers from planting in Canada and the northern U.S. Plains. July oats gained 3 1/2 cents, or 1%, to $3.48 a bushel.