U.S. corn futures are expected to rise in early trading Monday, as buyers focus on tighter supply outlooks amid signs of stabilizing global equity markets.
Analysts expect corn to open up three cents to five cents. In overnight electronic trading, the most-active December contract was up 4 1/2 cents or 0.6% at $7.19 a bushel.
The market continues to trade off last week's larger-than-expected reduction in U.S. Department of Agriculture production estimates. Government forecasters, cut their output forecast 4.1% from July, to 12.914 billion bushels, due to intense heat that damaged the crop.
"Futures look ready to open stronger across the board, after last week's searing volatility, as many investors may be just too tired, or on vacation, to jump in with both guns blazing again," said Bryce Knorr, analyst with agricultural publication Farm Futures in a market letter.
Uncertainty surrounding U.S. crop potential is seen providing support, as the market remains sensitive to yield and production cuts, with demand forecast to eat away at smaller 2011 production.
Traders will keep a close eye on weekly crop-progress reports from the USDA, to see whether crop conditions will continue to deteriorate. Analysts expect crop ratings to hold steady or show a slight decline, after a recent trend of deteriorating conditions.
The USDA is scheduled to release its weekly export inspections report at 11:00 a.m. EDT and its weekly crop progress report at 4:00 p.m. EDT.
"The problem this year is that there is a very fine line between producing enough grain and possibly running short, with some economists claiming that the difference between sufficient amounts of corn and rationing is three bushels per acre, said Karl Setzer, analyst with MaxYield Cooperative in West Bend, Iowa in a market note.
"Weekend Midwest rains were much more limited than expectations and even slightly drier than our forecast from Friday," Commodity Weather Group said in a morning forecast. "This has left at least 40% of the corn-belt unfavorably dry, stretching from C Indiana northwestward into southern Minnesota," CWG said in the forecast.
Rains are expected to favor the southwest and northeast corners of the Midwest over the next 10 days, with dry weather in the 11- to 15-day period, leaving most dry spots intact, CWG added.
Signs of stability in U.S. equities have traders considering the supportive fundamental picture of tighter supplies, but any shift in financial markets could quickly turn market sentiment. In early trading, U.S. equities and crude oil are higher, with the U.S. dollar index lower.