Corn Hits Record on Heavy Rain;
MOMING ZHOU / MarketWatch 9jun2008
SAN FRANCISCO — Corn futures rose on Monday to a record high for a third consecutive session, spurred by concerns that torrential rain in the U.S. Midwest could cut crop production.
The new record came despite a 25% increase in corn margin requirements in futures trading. Heavy rains and destructive storms, which have devastated the Midwest over the weekend, are forecast to continue Monday from central Texas to the eastern Great Lakes, according to Accuweather.
"The whole thing is a mess," said Austin Damiani, a broker at Frontier Futures Inc. "Definitely there is a lot of pounding in the fields, and there are acres that are going to be replanted."
Government data illustrated how planning and development of crops have been delayed by the recent rains. The Agriculture Department reported that as of June 1, 74% of corn seeds had emerged in the top 18 producing states, compared with 92% a year ago.
Corn futures for July delivery rose 6.4 cents to end at a new closing high of $6.572 a bushel on the Chicago Board of Trade. Earlier it soared to a new intraday record of $6.73 a bushel. Corn, on the rise since last Tuesday, has gained more than 10% in four days.
The volatility in corn futures trading prompted the CME Group, the parent of CBOT, to increase corn-trading margins. CME said in a statement late Friday that margin requirements for corn futures would increase by 25%.
Speculative investors will have to put aside a minimum of $1,688 per contract, or 5,000 bushels, in their account to initiate corn trading on the CBOT, up from $1,350. To maintain their trading, speculative investors have to put aside a minimum of $1,250 per contract, up from $1,000.
For hedgers, both initial and maintenance margins were raised to $1,250 from $1,000.
A speculator is defined by the CBOT as a market participant who tries to profit from buying and selling futures and options contracts by anticipating future price movements. A hedger is defined as someone who trades on the futures market to achieve protection against changing spot prices.
Elsewhere on the CBOT, July soybeans edged down 5.4 cents to $14.52 a bushel, and the same month wheat futures lost 22.4 cents to $7.884 a bushel.
Moming Zhou is a MarketWatch reporter, based in San Francisco.
CBOT Corn Review:
Higher On Weather;
Awaiting USDA Reports
IAN BERRY / Dow Jones Newswires 9jun2008
CHICAGO — Stormy weather pushed Chicago Board of Trade corn futures higher Monday, although traders cautious ahead of government reports Monday and Tuesday limited gains, analysts said.
July corn was up 6 1/2 cents to $6.57 1/2, September corn was up 6 3/4 cents to $6.70 1/2 and December corn was up 7 1/2 cents to $6.85 1/4.
Weekend storms and forecasts for more rain in the U.S. corn belt fueled concern that total acres and yield would suffer, traders said.
Jerry Gidel, an analyst with North American Risk Management Services, said planting was likely minimal during the past week and that there could still be 3 million to 4 million acres left to plant. Analysts said much of that land will either be turned over to soybeans, or growers will decide not to plant and opt for insurance instead.
The USDA's crop progress report will be released Monday afternoon. The portion of the crop rated good or excellent could drop by about 5%, from 61% last week, traders said.
After rallying to record highs last week, traders were cautious ahead of the U.S. Department of Agriculture's supply and demand report, which will be released at 8:30 a.m. EDT Tuesday morning.
"You've come a long way, you've got a big report coming out tomorrow, and I think you had people taking money off the table," a trader said.
Corn contracts closed almost 10 cents lower than highs reached in morning trading. July corn did not challenge its all-time high of $6.73, which had been set in overnight trading.
The market has already been factoring in reduced corn production, a trader said, and it would take a drop in projected yield below 152 bushels per acre for Tuesday's report to be seen as bullish. The USDA's projection last month was 153.9 bushels per acre.
Weaker crude oil and a stronger dollar limited gains, traders said, although the market remained weather-driven. DTN Meteorlogix forecasts more rain later this week, with up to 2 inches in the western corn belt Thursday and up to 1.5 inches in the east on Friday.
CBOT oats ended lower Monday on weak demand and a lack of bullish news, a trader said. July oats were down 5 1/4 cents to $3.94 per bushel, September oats were down 5 1/4 cents to $4.05 1/2 per bushel and December oats were down 5 cents to $4.21.
Ethanol futures were higher. July ethanol was up $0.007 to $2.458 per gallon and December ethanol was up $0.018 to $2.508.
Corn Futures Hit Another Record on Midwestern Rain
STEVENSON JACOBS / AP 9jun2008
Corn futures extended their climb, rising to a record for a third straight session Monday as heavy rains flooded fields and battered crops in Midwestern states.
Other commodities traded mostly lower, with crude oil retreating more than $4 a barrel and gold, silver, copper and wheat also falling.
Farmers are worried that excessive rain in the U.S. Corn Belt will damage recently planted crops and hurt yields, adding to the food inflation that has driven up the price of everything from eggs to meat to bread. Last week's rain-fed jump in corn prices was the largest one-week rally in the contract's history.
Corn prices are poised to go even higher, analysts say. Weekend showers dumped as much as eight inches of rain over parts of Iowa, Illinois and Indiana, and forecasts predict more bad weather later this week.
"If that rain materializes, then you can keep this upward march going," said Jason Ward, analyst with Northstar Commodity in Minneapolis. "Farmers are very concerned about lost acres. It's going to be uncertainty throughout the growing period."
Corn for July delivery jumped to a new trading record of $6.6725 a bushel on the Chicago Board of Trade before falling to settle at $6.5725 a bushel, up 6.5 cents.
U.S. farmers were expected to plant 86 million acres of corn this year, but wet weather in Midwestern states has left an estimated 4 million acres unplanted. With the corn planting season already over, farmers will either leave them empty and take insurance payments or switch the acres over to soybeans, which have a later growing cycle.
That would likely lift corn prices further, forcing consumers to pay higher grocery bills for meat and pork, as livestock producers would be forced to pass on higher animal feed costs and thin their herd size.
Other agriculture futures fell. Wheat for July delivery fell 22.5 cents to settle at $7.885 a bushel on the CBOT, while July soybeans dropped 5.5 cents to settle at $14.52 a bushel.
In energy markets, crude oil retreated as investors cashed in profits from last week's run-up. Meanwhile, Saudi Arabia said it would call for a meeting to discuss crude prices, which it said were unjustifiably high. Also weighing on prices was a statement by Treasury Secretary Henry Paulson said he wouldn't rule out intervention to stabilize the dollar, comments that boosted the greenback versus the euro.
Light, sweet crude for July delivery fell $4.19 to settle at $134.35 a barrel on the New York Mercantile Exchange.
Other energy futures also fell. July gasoline futures fell 15.4 cents to settle at $3.394 a gallon, and July heating oil futures fell 9.7 cents to settle at $3.877 a gallon.
In precious metals, gold futures fell slightly after the dollar gained against the euro, diminishing investor demand for safe-haven investments. Gold for July delivery fell 80 cents to settle at 896.10 an ounce on the Nymex, after earlier falling as low as $893.20.
Other metals also fell Monday. Silver for July delivery lost 22 cents to settle at $17.21 an ounce, while July copper fell a penny to settle at $3.613 a pound.