U.S. corn futures are expected to start higher Monday as a preliminary agreement to raise the U.S. debt limit lifts financial and commodity markets.
Traders predict corn for December delivery, the most actively traded contract, will open 7 cents to 9 cents a bushel higher at the Chicago Board of Trade. In overnight electronic trading, the contract jumped 8 3/4 cents, or 1.3%, to $6.77 1/2 a bushel.
News of the agreement is supporting grain prices after concerns about the lack of progress on negotiations drove the markets lower Friday. The deal is fueling broad-based speculative buying in global markets and encouraging traders to cover recently established short positions, analysts said.
Gains in equities and crude oil prices and weakness in the dollar should add support to the grain markets, as "the dramatic resolution lifted a cloud that had threatened the still fragile economic recovery at home," said Brian Hoops, president of Midwest Market Solutions, a commodities brokerage in South Dakota. He confirmed that "the grain markets rallied on the news" of the tentative agreement.
Traders also are keeping a close eye on the weather, as farmers need favorable conditions to grow a big crop to replenish tight supplies. Conditions appear to have improved after hot weather stressed corn in late July.
Storms brought beneficial moisture to the Corn Belt during the weekend, but "organized rains this week now appear likely to slip too far north to catch many of the remaining dry spots" in Indiana, western Ohio and central and southwestern Illinois, according to Commodity Weather Group. That leaves "at least one-third of the belt with notable stress this week," the private weather firm said in a forecast.
More rains next week will likely bring relief to southern parts of Illinois, Indiana and Ohio, according to Commodity Weather Group. Yet that "could still leave one-quarter of the corn/soy unfavorably dry," it said.
Traders are watching weather forecasts for other countries, as well. China's northeastern agriculture belt may see little rain in August, threatening another round of drought, the Ministry of Agriculture said in a report during the weekend, citing meteorological agencies. A poor harvest in China could potentially prompt its government to increase U.S. imports, which would boost prices. The majority of China's corn is harvested in October and November, around the same time as the U.S. crop.