CNS Canada — Corn and soybean futures at the Chicago Board of Trade are both likely to correct lower after sharp gains on the week, according to one U.S. analyst.
Corn prices are slightly overdone, and will likely decline in coming sessions, said Terry Reilly of Futures International.
Reilly said he expects prices to correct back to a $3.70-$3.75 range (all figures US$). The corn market closed at $3.9475 on Wednesday.
But despite the likelihood of lower prices moving forward, the market still has a number of bullish factors which will limit losses.
“There’s a drought in central Brazil that’s kind of hammering the corn crop, which is in the pollination phase,” Reilly said.
Widespread rains are not expected to relieve the country’s hot, dry conditions until at least next week, he added, which is keeping underlying support in the futures market.
However, Brazil has dropped its import tax on one million tonnes of corn.
Many traders are taking the news as bullish, Reilly said, but he thinks the U.S. likely won’t be the country’s first choice to buy from.
“Brazil may likely take corn from Argentina, Paraguay or Uruguay,” he said.
Increased fund buying is also underpinning the market, Reilly said.
Since last week, corn prices have gained 21.25 cents per bushel in the May contract.
Soybeans, like corn, are likely to correct lower, Reilly said, expecting the market to move to a $9.60-$9.65 range over the course of the week.
May soybeans closed at $10.0975 after gaining 54 cents on the week.
Argentina is seeing heavy rainfall, which along with fund buying propped up the market.
But Reilly said the fact remains that U.S. exports are at a premium to South America, even if the region sees crop losses.
“Soybeans, that’s probably overbought in our opinion,” he said. “The fundamentals haven’t changed in the beans. We still have a large Brazilian crop,” he said.
— Jade Markus writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.