U.S. corn futures are expected to fall early Monday on expectations that federal forecasters will increase their estimates for grain inventories in a monthly crop report.
Traders predict corn for December delivery, the most actively traded contract, will open down 7 cents to 9 cents a bushel at the Chicago Board of Trade. In overnight electronic trading, the contract dropped 9 cents, or 1.4%, to $6.28 a bushel.
Pushing down prices are projections for the U.S. Department of Agriculture to raise its estimates for corn supplies in a report due at 8:30 a.m. EDT Tuesday. The department will peg corn inventories for the upcoming crop year at 1 billion bushels, up 46% from its June estimate, according to the average prediction of 17 analysts surveyed by Dow Jones Newswires.
Expectations for inventories to expand are overshadowing concerns that hot weather may hurt the crop growing in the Midwest, traders said. Market participants have become more comfortable with supply levels since the USDA on June 30 issued a surprisingly high estimate for existing stockpiles of corn, sparking a sell-off that dragged prices to 3 1/2-month lows.
"Weather spin isn't bullish enough for a market that continues to suffer from effects of recent equity drawdown," said Duane Lowry, analyst for Early Market News.
Traders are keeping a close eye on supplies after prices climbed to an all-time high in early June on concerns about strong demand draining inventories. Prices have since pulled back 16%.
Farmers still need favorable weather to produce a large crop to replenish grain bins. Meteorologists at private weather firm Telvent DTN said corn likely benefited from recent warm to hot temperatures and adequate soil moisture in most areas of the central U.S. However, a period of hot, dry weather is expected as a heat ridge builds into the area. Crops will come under some stress if the highs exceed 95 degrees Fahrenheit for more than a few days, Telvent said in a forecast.
In other news, pressure from the rising U.S. dollar and falling crude oil prices should weigh on the grain markets. A strong dollar makes U.S. grain less attractive to foreign buyers, while oil is linked to the grain markets because ethanol is made from corn.