CBOT corn outlook: Futures to climb on supply concerns, China

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U.S. corn futures are expected to open higher Wednesday on concerns over the development of the U.S. crop, growing Chinese import demand and broad-based market strength.

Traders expect corn to open 17 to 25 cents higher. In overnight trade, corn for July delivery at the Chicago Board of Trade was up 23 1/2 cents, or 3.4%, to $7.06 1/2 a bushel. The September contract was up 22 3/4 cents to $6.92 3/4 a bushel.

Corn futures continue to recover after falling sharply from all-time highs set at the start of the month. Analysts said a renewed focus on tight existing supplies and challenges the new U.S. crop faces are fueling the price strength.

"I think the market has overshot to the downside," said Jason Britt, president of brokerage Central States Commodities.

Traders are positioning themselves ahead of a closely-watched U.S. Department of Agriculture report Thursday that's expected to reaffirm supplies are tight and the new crop will be smaller than originally expected after wet weather prevented farmers from planting all the land they wanted.

Analysts on average expect the USDA to peg 2011 corn plantings at 90.776 million acres, according to a Dow Jones Newswires survey. The expected total is in line with an agency report earlier this month that put plantings at 90.7 million acres, but is below the USDA's original estimate in March of 92.178 million acres. In a separate report also due out Thursday, the agency is expected to estimate corn inventories as of June 1 at 3.324 billion bushels, down 23% from a year ago.

"We need every bushel, every acre and it's not happening," Britt said.

Further support for corn futures is expected from broad commodity strength after Greek lawmakers approved a new five-year package of spending cuts and other measures required before other euro-zone members will provide needed funds for a sovereign-debt package.

As for demand, China has bought at least 1.7 million metric tons of U.S. corn in the last four months--including 700,000 tons in recent weeks, according to traders, shipping executives and cargo surveyors interviewed this week by Dow Jones Newswires.

China became a net importer of corn in 2010 for the first time in 15 years, and its purchases are being watched closely, particularly as supplies in the U.S. run low. The U.S. is the largest exporter of the grain.

Still, analysts at Jefferies in a report Wednesday said they don't see corn reaching $8 a bushel, a level the front-month contract nearly breached in early June.

"We acknowledge the near-record low inventory levels for corn, but believe a softening global demand outlook when combined with recent favorable U.S. weather trends, improving prospects for competing crops [European wheat] and falling oil prices will likely prevent the return of $8 corn," they wrote.

--Sameer Mohindru in Singapore contributed to this report.



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