US corn belt to see more rain, floods - report

01 May 2008 20:24  [Source: ICIS news]

HOUSTON (ICIS news)--Forecasts issued on Thursday showed more rain was heading for the northern part of the US corn belt over the next few days, maintaining the slow outlook for the ammonia application season and supporting corn prices.

A powerful spring storm system will move slowly through eastern Iowa and into Illinois later on Thursday, producing moderate to heavy rainfall and some flooding, the National Weather Service (NWS) said.

"The rainfall from this storm system will at a minimum slow down the rate of fall on area rivers," the NWS said. "It is conceivable that some tributary rivers may stop falling and climb toward a second crest next week."

Ammonia market participants have been idled for much of the last few weeks as the above-normal rainfall has kept farmers out of their fields.

Corn planting was only 10% done as of 27 April compared with an average 35% for the same period in the previous five years, according to latest US Department of Agriculture (USDA) data.

The delayed start to the season may encourage some farmers to switch to soybeans, which would impact overall ammonia demand while keeping upward pressure on corn values, some market sources said.

The outcome might also impact the speed of the eventual refill of the ammonia supply chain, which has backed up to the US Gulf and left the New Orleans barge market at a standstill for weeks.

As much as 1m short tons (st) of ammonia may be left unused because of the weather issues, one fertilizer distributor said.

But another fertilizer market source said the economic incentive was still strong for ammonia to be applied.

Many farmers have pre-paid for their ammonia at levels around $200/st (€140/tonne) or more below the current midwest price around $705/st, and they have until 30 June to take delivery, the source said.

Few would be willing to give up the benefit of the lower price they have locked in, the source said.

Nearby corn futures on Chicago's CME  reached a high at 615.75 cents/bushel earlier this week, but have since been kept in check by a strengthening of the US dollar. Corn futures were around 400 cents/bushel a year ago.

Around 12:15 Central Time (17:15 GMT) the front-month corn contract was at 595.00 cents/bushel, down 5.20 cents from the previous session.

The latest spike in corn futures has helped put ethanol on an uptrend, a biofuels market source said.

($1 = €0.64)

Additional reporting by William Lemos and Stephen Mitchell

For more on ammonia visit ICIS chemical intelligence

By: Stephen Burns
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