U.S. corn futures are expected to start at their highest level in more than two months Monday as declining output expectations fuel buying.
Traders predict corn futures will start up 6 cents to 8 cents a bushel at the Chicago Board of Trade. In overnight electronic trading, corn for September delivery, the nearby contract, rose 7 3/4 cents, or 1%, to $7.60 3/4 a bushel, the highest front-month price since mid June. Corn for December delivery, the most actively traded contract, jumped 7 cents, or 0.9%, to $7.74 a bushel and set a new contract high.
Concerns about output are pushing up prices as analysts are cutting their harvest forecasts due to damaging heat and dryness. Agricultural firm Pro Farmer became the latest to slice its outlook Friday, pegging the crop at 12.5 billion bushels, 3% below the U.S. government's estimate.
Traders and grain users are nervous about the cuts because strong demand has drained inventories to historically low levels. Supplies are expected to tighten further in the coming year as demand is projected to exceed output.
"Early yield reports are disappointing to the trade as the market was hoping for a huge crop this year that would rebuild U.S. ending stocks to a more comfortable level," said Brian Hoops, president of Midwest Market Solutions, a commodities brokerage in South Dakota.
Additional support for prices should come from speculative buying, traders said. Commodity funds were heavy buyers in the market on Friday, pushing the December contract to a new high.
The December contract looks to be on track to attempt to reach $8 a bushel, analysts said. The nearby contract is about 5% below an all-time high set in June.
"The positive closes last week along with strong fund buying spilled over into the overnight trade last night and should continue right into the open this morning," said Tomm Pftizenmaier, analyst for Summit Commodity Brokerage in Iowa.
Yet, it will be difficult to sustain prices at that level as it will likely cause further reductions in demand for the grain, analysts said. The U.S. Department of Agriculture will give an update on demand at 11 a.m. EDT when it issues weekly data on inspections of corn for export. Weekly export sales data issued Thursday were lackluster.