Forget ethanol, corn is once again a weather play, trading above $7.30 per bushel from $5 in late March. As of June 1, 4 million acres had yet to be planted due to excessive rain. Now the resulting crop damage from persistent cold wet weather threatens a below trendline yield for the first time since 2002.
“A lot of people were expecting corn to rally beyond $7. I don’t think anybody expected it this early in the summer,” says Robert Kurzatkowski, futures specialist at OptionsXpress. And wet soil generally results in shallower roots, which are then more susceptible to withering heat in late June, July and August, he says. In July, support for December corn starts at $6.55, and resistance is psychological. “In previous years, we didn’t have the fundamentals lining up like this year. If we cross $8, it’s anybody’s guess.”
Stephen Davis, broker for RJO Futures notes that funds had bought 40,000 contracts in early June, and halfway through the month, Central Iowa had seven inches more rain than normal. “Rain makes grain,” he says, but too much, too soon is keeping it out of the ground. However, he says drier, more favorable weather is on the way and he is expecting a pull back and trade between $6 and $6.50 per bushel.
