March corn ended down 30 cents, the exchange-imposed daily trading limit, at US$3.80 3/4 a bushel, May corn ended at US$3.91 1/4 and July corn ended at US$4.01 1/2.

 

The March contract was trading synthetically at US$3.73 a bushel and May corn was trading synthetically at US$3.84, traders said.

 

The catalyst for the drop was the government's ending stocks estimate of 1.790 billion bushels, up from the December estimate of 1.474 billion. The trade was awaiting increased carryout because of waning demand, but the increase was far greater than expected.

 

Corn had continued to post gains recently, and rallied more than US$1 from its December lows. But the rally was based largely on outside markets and technical momentum, analysts said, which came to an end with the report.

 

"It confirmed my worst fears: that we're in a demand-bear market, and it certainly does illustrate why corn ended up being a reluctant follower to the beans' healthy advance," said John Kleist, broker/analyst with Allendale in McHenry, Ill. "I think the report says we don't have enough demand to justify US$4."

 

The report also quieted ideas that the market needed to climb in order to compel more planted acres, analysts said.

 

"Now it's the market's job to discourage plantings," a trader said. He expects corn to head toward US$3.50 before stabilizing.

 

In addition to the increased carryout, the USDA also increased production to 12.101 billion bushels from 12.020 billion, surprising analysts who expected a slight decrease.

 

Corn fell below its 20-day and 50-day moving averages Monday, and analysts said with the limit-down close, the market would continue to be pressured into Tuesday, and the report would limit upside potential.

 

"I think every farmer out there is going to tell themselves 'you know what, if front-month corn gets back to US$4.10 I'll sell some, and if new crop gets to US$4.50, I'll sell some,'" said Chad Henderson, analyst with Prime Ag Consultants. "So I think that kind of puts a ceiling back in this market."

 

The USDA in its supply-and-demand report cut 100 million bushels from projected ethanol demand, and 50 million bushels each from feed and export demand. Analysts had expected only a slight cut to ethanol demand because the USDA had already cut it last month.

 

"My impression is usually the government is slow in adjusting their demand forecast, and they must be very concerned for how much they continue to slash demand, from feed to ethanol to exports," Henderson said.

 

CBOT oats futures ended lower on outside pressure. The USDA made no changes to oats in its supply and demand report for 2008-09, other than to increase the average farm price 10 cents. March oats were down 17 cents to US$2.13 a bushel, May oats ended down 17 cents to US$2.22 1/2 and July oats ended down 17 cents to US$2.32.

 

Ethanol futures were lower. February ethanol ended down US$0.099 to US$1.586 a gallon and March ethanol ended down US$0.077 to US$1.615.