U.S. corn futures are expected to start mixed as traders take some profits after prices surged Tuesday on declining output estimates.
In overnight electronic trading, corn for December delivery, the most actively traded contract, slipped 3/4 cent, or 0.1%, to $7.15 a bushel. The contract retreated slightly after surging Tuesday by the one-day limit of 30 cents to a contract high.
Profit-taking is putting pressure on the market as traders worry historically high prices will reduce demand for corn.
Yet, grain users remain nervous about the potential for a smaller-than-expected harvest due to damage from intense heat last month. Brokerage firm FCStone on Tuesday estimated the average corn yield at 153.2 bushels an acre, well below the U.S. Department of Agriculture's last estimate of 158.7 bushels.
"A yield that low would really tighten up the carryout, but we also must keep in mind that demand really starts to dry up when corn prices get above the $7.00 level," said Tomm Pfitzenmaier, analyst for Summit Commodity Brokerage.
Traders are keeping a close eye on output estimates amid lingering uncertainty about the impact of hot weather on the crop last month. Traders are waiting for the USDA to update its output forecasts next week to see whether the government indicates the high temperatures caused significant damage.
The size of this autumn's harvest is important because farmers need to grow a large crop to replenish low inventories. Supplies of corn are expected to reach a 15-year low this year and tighten further in the upcoming year.
Anecdotal reports in the market indicate the crop suffered from hot weather that came during a critical period of development in late July. The full impact of the heat won't be known until harvest begins.
"We are hearing reports corn fields in east central Illinois are giving up and turning brown. Also, almost any crop south of Kansas City is also turning brown," said Brian Hoops, president of Midwest Market Solutions, a brokerage in South Dakota.
Private analytical firm Informa Economics will be the next private firm to take a stab at forecasting the crop. It is expected to release output estimates Thursday.