January 14, 2010

Large supplies weigh on CBOT grains

Grain futures at the Chicago Board of Trade continued its decline in early trade on Wednesday (Jan 13), pushed lower by the bearish supply picture depicted by the government on Tuesday (Jan 12).

Corn once again showed the sharpest drop, and the March contract was down 4.3% at US$3.75 1/4 a bushel in early trade. It traded as low as US$3.68 3/4 after the open.

The drivers behind the slump were USDA reports estimating record 2009 crops for both corn and soy. The corn estimate in particular caught traders off guard, because most were expecting a crop reduction following a wet, late harvest.

After dropping 30 cents, the exchange-imposed daily trading limit, on Tuesday (Jan 12), the limit for corn Wednesday (Jan 13) is an expanded 45 cents.

Despite the early losses, traders said that the markets were stabilising Wednesday (Jan 13), as end-users take advantage of the market's break to meet some needs at cheaper prices.

Losses were more subdued in the wheat and soy markets. USDA estimates for those markets were not quite as bearish, traders said, although a huge South American soy crop and large world wheat supplies are weighing on prices.

CBOT wheat was down 2% in early trade, at US$5.25 in the March contract. After modest losses early, March soy have rebounded and were up less than a penny, at US$9.78 1/2.