U.S. corn futures are expected to start stronger Tuesday as long-range purchases by Mexico increase concerns about dwindling inventories.
Analysts predict corn for July delivery, the most actively traded contract, will open up 2 cents to 5 cents a bushel at the Chicago Board of Trade. In overnight electronic trading, the contract slipped 1 3/4 cents, or 0.2%, to $7.30 1/4 a bushel.
Export demand should support prices, as private exporters struck deals to sell 822,960 metric tons of U.S. corn to Mexico, traders said. Of the total, 548,640 metric tons was for delivery during the 2011-2012 marketing year, which begins in September, and 274,320 metric tons was for delivery in the 2012-2013 marketing year, which begins in September 2012.
It is unusual for buyers to book corn more than a year ahead of time, fueling projections Mexico may be anticipating prices to rise next year. Corn futures have pulled back about 7% since reaching a record high in April on concerns about strong demand draining inventories, which are projected to reach a 15-year low this year.
"Their buying in general is usually very, very smart," said Rich Nelson, director of research for brokerage firm Allendale, about Mexico. "They're clearly value buyers. For right now, they apparently see corn as being a value."
The purchases come after corn prices tumbled 2.9% Monday under pressure from forecasts for favorable crop weather in the U.S., the world's top exporter of the grain. Prices had rallied earlier in the spring as persistent rains delayed planting of the crop and sparked worries farmers wouldn't plant as many acres as they intended.
Corn planting was 94% complete as of Sunday, up from 86% a week earlier and near the five-year average of 98% for that time of year, according to data issued Monday by the U.S. Department of Agriculture. Planting was nearly complete in Iowa and Illinois, the country's top two corn-producing states.
Still, grain users remain nervous about the crop. Harsh summer weather could hurt output, making it difficult for farmers to replenish inventories.
"Some sort of corrective price action from Monday's lashing is expected," according to a note from AgResource Company, an agricultural consultancy in Chicago.
Grain users worry about inventories as federal forecasters are expected to tighten their supply estimates in a monthly crop report due Thursday. A survey of 19 analysts by Dow Jones Newswires predicted inventories would drop to 715 million bushels by the end of the 2010-11 marketing year on Aug. 31, down 2% from the USDA's May estimate, and stay well below one billion bushels in the 2011-12 marketing year.