January 15, 2009

 

CBOT Corn Review on Wednesday: Ends higher in correction; weather supports

 

 

Chicago Board of Trade corn futures ended higher Wednesday, bouncing on oversold conditions and weather, traders say.

 

March corn ended up 4 cents to US$3.66 1/2 per bushel, May corn climbed 4 1/4 cents to US$3.77 1/2 and July corn settled up 4 1/4 cents to US$3.87 3/4.

 

After getting pounded for two days and falling almost 50 cents after Monday's bearish USDA carryout and production estimates, the market stabilized Wednesday. Corn was considered oversold after breaking so sharply, and end-user buying has given the market support, traders said.

 

"Monday was the bombshell; Tuesday was triage," says Arlan Suderman, analyst with Farm Futures. "Today we've re-established the balance and we're in recovery."

 

Traders and analysts have different views on how long the bearish sentiment from the U.S. Department of Agriculture's reports will linger and whether corn has much upside potential. Some say the USDA's estimated 1.790 billion carryout for 2008-09 will limit any gains.

 

The market is looking to hot, dry weather in Argentina for support, traders said. The crop there is in a critical period of its growing season and needs rain.

 

Vic Lespinasse, analyst for grainanalyst.com, added there was support from frigid weather in the U.S. Midwest, which will require livestock producers to provide more feed to their shivering herds.

 

Corn was considered oversold after dropping more than 60 cents since its recent highs, and that break in prices is allowing ethanol producers to at least break even, traders said.

 

There are also signs that it will help export sales, analysts said. "It certainly improved our competitiveness, which hasn't been that good," Lespinasse said.

 

Bearish equities and lower crude oil limited corn's upside movement, traders said. The U.S. stock market fell sharply, and a lingering world recession is expected to keep a lid on demand, analysts said.

 

CBOT oats futures ended higher. March oats climbed 7 cents to US$2.16 per bushel and May oats ended up 7 cents to US$2.25 1/2.

 

Ethanol futures were slightly lower. February ethanol ended down US$0.011 to US$1.571 per gallon and March ethanol ended down US$0.004 to US$1.568.