U.S. corn futures are poised for a mixed start Tuesday, with strength in the U.S. dollar weighing on nearby contracts, while lagging planting progress supports new crop contract futures.
Analysts expect corn to open mixed with old crop contracts down 2 cents to 3 cents, and new crop futures up 6 cents to 8 cents. In overnight electronic trading, the most-active July contract was down 2 1/2 cents or 0.3% at $7.32 a bushel, and December corn was up 8 3/4 cents or 1.3% at $6.70.
New crop corn futures are set to be the bullish stalwart of the market, as the third slowest U.S. corn planting pace, with forecasts for continued wet conditions in the eastern Midwest and the south buoy prices, said Dan Basse, president AgResource Co., in a market note.
Corn traders are following weather forecasts closely because farmers need good weather to grow a large crop to replenish inventories. Concerns about strong demand draining supplies recently pushed prices to a record high of $7.83 3/4 a bushel.
Earlier corn planting is typically better for final yields, as it reduces the chance the crop will still be developing when the season's first frost hits.
Corn planting was 13% complete as of Sunday, up four percentage points from a week earlier, according to U.S. Department of Agriculture data issued Monday. That was down from 66% a year earlier, when farmers sowed the crop at a record-fast pace, and below the five-year average of 40% for that time of year.
The corn planting pace is one of the slowest since the data began to be compiled in the 1980s with Illinois, Indiana and Ohio not making any progress last week, said Shawn McCambridge, senior grains analyst with Prudential Bache in Chicago.
Weather forecasts indicate farmers will continue to struggle to plant the crop in the eastern belt and Delta, yet actively sow crops in the western belt. Rains are expected to keep soils soggy in the eastern Midwest and in the Mississippi delta.
Worries about a slow start to planting are elevated because inventories are projected to fall to a 15-year low before next fall's harvest. Farmers need to produce a large crop to rebuild inventories and ease high prices, which rose to a record high last month.
Weather will remain the driving force behind price moves in corn, with drier outlooks for the western Midwest this week providing potential for a pick up in the seeding pace for a crop already being planted at half the pace of normal for this time of year, analysts said.
The Telvent DTN weather forecast said heavy rains through the eastern and southern Midwest and Delta will continue to threaten severe floods and will allow for only limited field work or planting this week.
Meanwhile, nearby contracts are expected to draw pressure from investors reducing risk exposure in the market, as strength in the U.S. dollar produces broader based weakness. A higher U.S. dollar is bearish for commodities as most raw materials are dollar-denominated, making it more expensive for foreign buyers to import.