Frost fears to keep US grain markets nervous-panel

CHICAGO, Sept 11 - U.S. farmers look set to harvest huge corn and soybean crops this year but the possibility of frost later this month is keeping the markets on tenterhooks, analysts told a panel hosted by the Chicago Board of Trade on Friday.

A slumping dollar and recent falls in futures prices at the Chicago Board of Trade were drawing strong export demand, analysts Jim Bower of Bower Trading and Don Roose of U.S. Commodities also told the panel on the U.S. Agriculture Department's September crop report.

"Planting got off to a late start, particularly in southern Illinois, Indiana and Kentucky. The trade is still worried about development and maturity of the crop," Bower said.

"We still have to be wary for the potential for an early frost," he said, adding that a weather model was showing low temperatures for Sept. 23 and 24. "I am concerned, particularly about corn and soybeans that were planted late."

The USDA, in its September crop report, estimated the soybean crop at 3.245 billion bushels, just below an average of trade estimates for 3.249 billion bushels. The USDA pegged the corn crop at 12.954 billion bushels, above an average trade estimate for 12.901 billion bushels.

U.S. Commodities' Roose said traders were expecting large production numbers for corn and soybeans, and added that the USDA had raised its estimates for demand.

"Big crops typically get bigger. Demand is the great equalizer," he said, adding that with the declining value of the dollar, "We have been able to buy demand."

The USDA raised its estimate of U.S. corn exports to 55.88 million tonnes in the 2009/10 marketing year that began Sept. 1 from its August estimate of 53.34 million tonnes.

The amount of corn used to feed livestock in the United States was raised to 135.90 million tonnes from an estimated 134.63 million in August.

The livestock sector has been suffering under the weight of high feed grain prices, slower demand due to the recession and the spread of the H1N1 flu globally.

The USDA, however kept its estimate of the amount of corn used to produce ethanol at 4.2 billion bushels, in a possible indication that the industry was still struggling from the fallout of last year's run-up in corn prices to record highs.

Roose also said the weather through September was going to be an important factor to crop development.

"It's going to be a race to the finish," he said. "Weather will be a constant feature each week. When a cold mass comes down, it makes the trade a little bit nervous."

Traders were expecting Chicago Board of Trade corn futures to open steady to 2 cents per bushel higher on Friday, and soybeans were called mixed, up 5 cents to down 5 cents.

The U.S. dollar fell to a one-year low against major currencies as optimism about the global economy after strong Chinese data encouraged investors to favor higher yielding currencies and stocks.