U.S. CORN: Futures Extend Gains on South America, Technical Strength

-U.S. corn futures are slightly higher

-Support from tight world supplies, rising South America prices

-Technical outlook improves, attracting buyers

 
   By Ian Berry 
 

CHICAGO--U.S. corn futures are up slightly amid tight supplies, technical buying and worries about the South America crop.

Corn for December delivery at the Chicago Board of Trade was recently up 3 1/2 cents, or 0.5%, to $7.59 1/4 a bushel. March corn was up 2 1/2 cents to $7.59 1/2.

The market is extending gains from Wednesday's 2% rally, as traders note corn has held above key support levels, including the 100-day moving average. That has attracted more buying from investment funds anticipating greater gains, analysts said.

"The market seems to have broken out of the top side of the downtrend line that has been forcing our decline since mid-October," brokerage FCStone said in a report to clients.

Front-month futures are also hovering right at the 50-day moving average, a level corn hasn't closed above in nearly two months.

Traders remain nervous about world supplies. While a record South American crop is needed to meet demand after the worst drought in decades baked the U.S. crop, excessive rains to start the season have delayed plantings in some areas and prompted worries about yields.

Traders note that South American prices have climbed recently, which FCStone said is "stopping any movement of corn into the U.S." Some meat producers have recently imported corn at the U.S. east coast, taking advantage of cheaper South American prices.

The shift in South American prices and production prospects could lead to more U.S. export demand, but for now weak exports and a struggling ethanol industry, which uses about 40% of the corn crop, will limit the market's upside, analysts said.

The U.S. harvest is mostly complete but slowed last week due to rainfall. The U.S. Department of Agriculture reported 91% of the crop was harvested as of Sunday, up from 87% a week ago but below analyst expectations. The crop was 74% harvested a year ago at this time.(JP)