January 7, 2009

 

CBOT Corn Review on Tuesday: Climbs on outside support, weather, technical buying

 

 

Outside market support, concerns about the South American crop and technical momentum sent Chicago Board of Trade corn futures surging Tuesday.

 

March corn ended up 16 1/4 cents to US$4.27 1/2 per bushel, May corn ended up 16 1/2 cents to US$4.38 and July corn climbed 16 1/2 cents to US$4.48.

 

The market closed near the session high, with the March contract reaching its highest close since Nov. 4. Traders said stronger crude oil and soybeans supported corn, although crude retreated late. Most commodities gained Tuesday.

 

Funds are buying corn, traders added. But analysts continue to note that corn has little fundamental reason to continue to rally, as demand remains weak for exports, ethanol and feed.

 

One analyst said corn's climb could prove to be nothing more than a short-covering rally.

 

"It still seems like a fairly large correction from the huge break we saw in the last half of last year," said John Kleist, broker/analyst with Allendale.

 

Kleist said ideas that the market needs to buy acres - which he disputes - are helping push corn higher. He added another possibility - that the market needs to buy fertilizer.

 

He said there is increasing talk of fertilizer companies telling producers they had better purchase their fertilizer now, even at higher prices, because if they wait too long they will be unable to secure it, which would hurt yields.

 

Producers have been waiting for fertilizer prices, which spiked last year, to retreat.

 

On Tuesday, an official with Mosaic Co. (MOS), a leading phosphate producer, called the wait "a dangerous game of chicken."

 

Dry weather, particularly in Argentina, is also propping up the market, traders said, and commodities' strong performance recently could be prompting more fund money to re-enter the market.

 

An analyst adds that a new U.S. president after eight years is prompting some to take a more optimistic outlook on the economy.

 

"You'd have to really expect that as a new president comes in, there will be positive news for a while," says Sid Love, analyst for Kropf & Love Consulting.

 

CBOT oats futures climbed amid the rising tide of neighboring markets, traders said. A trader noted that the corn-oats spread had widened considerably during the past month as corn rallied sharply. March oats ended up 12 cents to US$2.28 per bushel, May oats ended up 12 1/4 cents to US$2.37 1/2 and July oats ended up 12 1/4 cents to US$2.47.

 

Ethanol futures ended higher. January ethanol ended up US$0.044 to US$1.675 per gallon and March ethanol ended up US$0.044 to US$1.704 per gallon.