January 8, 2010

 

CBOT Corn Review on Thursday: Lower on bearish soy, but losses limited

 

 

Chicago Board of Trade corn futures ended lower Thursday on pressure from tumbling soy, traders said.

 

March corn ended down 4 1/4 cents at US$4.17 1/2 a bushel and May corn ended down 4 cents at US$4.28.

 

The market couldn't hold up in the face of 30-cent losses in soy, but corn withstood the pressure pretty well by comparison, traders said. Wheat also fell, and one trader said "it looks like you've got some buying of corn and selling of wheat today."

 

Looming over the market was China's decision to raise a key interest rate, which was seen as bearish for commodities generally but particularly soy, which have rallied thanks to buying by China.

 

Favorable South American weather is also bearish, particularly for soy but also corn, traders said.

 

They said the market is bracing for index-fund rebalancing, which is expected to boost corn prices. There were different takes on that dynamic Thursday. Joel Karlin, an analyst for Western Milling, said that after weeks of anticipation, a "buy the rumor sell the fact" sentiment might have weighed on prices Thursday. But a floor trader said that buying in anticipation of that rebalancing continued Thursday, and kept a floor under the market. The rebalancing is expected to start Friday, traders said.

 

Funds sold an estimated 8,000 contracts Thursday.

 

The trade is also awaiting what many expect will be mildly bullish government reports Jan. 12.

 

Analysts surveyed by Dow Jones Newswires are on average expecting the U.S. Department of Agriculture to estimate the 2009 corn crop at 12.819 billion bushels, down from its previous estimate of 12.921 billion.

 

Ending stocks for 2009-10 are projected at 1.613 billion bushels, down from the December estimate of 1.675 billion.

 

The USDA will release the estimates Jan. 12 at 8:30 a.m. EST.

 

Karlin said that another long-term supportive factor for the market is the need to have farmers plant more corn acres in 2010. But with soy stumbling, he added, "I don't think that's going to be a problem."

 

Demand remains relatively weak, as demonstrated by lackluster weekly export sales reported Thursday morning, analysts said.