U.S. corn futures are poised to extend losses early Wednesday after dropping by the daily limit Tuesday on profit-taking sparked by concerns about political upheaval in North Africa.
Traders predict corn for May delivery, the most-active contract, will start 10 to 15 cents a bushel lower at the Chicago Board of Trade. In overnight electronic trading, the contract tumbled 15 1/2 cents, or 2.2%, to $6.74 3/4 a bushel.
Uncertainty about the global economy is expected to weigh on futures again as unrest in Libya helps fuel concerns about the future of the global economy. Commodity funds are liquidating long positions, or bets prices will rise, after the market reached a 31-month high Tuesday before settling down the daily 30-cent limit, said Larry Glenn, broker and analyst at Frontier Ag, a brokerage in Kansas. The daily limit is temporarily expanded to 45 cents Wednesday.
Yet, users of corn remain nervous about end-of-season corn supplies, which are projected to come in at a 15-year low. Demand for the grain has been strong, and traders are watching for signs of increased buying following the break in prices.
The U.S. Department of Agriculture said Tuesday that weekly inspections of corn for export reached 38.1 million bushels for the week ended Feb. 16, up from 27.5 million a week earlier. That topped traders' expectations for inspections of 28 million to 33 million.
"The fundamentals were ignored" Tuesday, Glenn said. "Other things took precedence and that was getting out of long positions in large quantities by the funds."
Rich Feltes, senior vice president of research for brokerage RJ O'Brien, said it's likely corn prices will continue to set new highs. However, wheat and soybean futures are vulnerable to further liquidation because supplies are not as tight in those markets, which could pull corn lower, he said.
"Lower corn prices now will only stimulate even higher off-take of corn," Feltes said.
Traders are waiting for USDA to issue updated forecasts for crop plantings and supplies at its annual Outlook Forum conference Friday. Projections for larger-than-expected corn plantings, released last week as part of the government's "baseline" report, helped knock down prices.