January 13, 2010

 

CBOT Corn Review on Tuesday: Falls limit down on huge crop

 

 

Chicago Board of Trade corn futures tumbled Tuesday, dropping by the exchange's daily trading limit following the government's bearish crop estimates, traders said.

 

March corn ended down 30 cents to US$3.92 1/2 per bushel, and May corn ended down 30 cents to US$4.03.

 

The reason for the drop was the U.S. Department of Agriculture's projected record U.S. crop of 13.151 billion bushels, including a huge yield of 165.2 bushels per acre.

 

"The corn--what an astoundingly huge number," said Jack Scoville, vice president for Price Futures Group.

 

The large crop also translated into a bearish 2009-10 ending stocks projection and higher-than-expected stocks as of Dec. 1.

 

Coming into the report, the question for traders wasn't whether the USDA would reduce the corn crop, but by how much.

 

"The key surprise is that we could produce a record corn crop under such dire conditions this year, from a wet spring that delayed planting to a wet fall that left some corn in the field," said Brian Basting, grain analyst at Advance Trading.

 

The USDA reports were also seen as bearish for soy, and Roose said the estimates signal a "sea change" for the markets.

 

Traders said that after hovering close to resistance around US$4.25 for days, the market's trend is now lower. Prices fell by the 30-cent daily limit on the open and stayed there all day, and traders said the market was another 10 cents lower in options trade.

 

Funds sold an estimated 15,000 contracts. Traditional speculative funds have recently held their biggest net long position since June 2008, and traders said that made Tuesday's slide worse, as a lot of those who recently added on long positions scrambled to get out of them.

 

Wednesday's trading limit will be an expanded 45 cents.

 

CBOT oats futures ended sharply lower. The USDA on Tuesday increased its U.S. ending stocks projection for oats, and slightly reduced its projected season average farm price. March oats ended down 15 1/2 cents to US$2.52 1/2 per bushel and May oats ended down 15 1/4 cents to US$2.61.

 

Ethanol futures were lower. February ethanol ended down US$0.086 to US$1.818 per gallon and March ethanol ended down US$0.091 to US$1.820.