January 28, 2010

 

CBOT Corn Review on Wednesday: Ends down on supply, seasonal pressure

 

 

Chicago Board of Trade futures continued to descend Wednesday, ending lower on large supplies, seasonal pressure and concerns about possible changes for U.S. banks.

 

March corn ended down 4 cents, or 1.1%, to US$3.58 1/4 per bushel and May corn ended down 4 cents to US$3.69 1/4.

 

The March contract is at its lowest price since early October and made another new low Wednesday. The market's recent slide has been gradual.

 

Traders are awaiting President Barack Obama's State of the Union speech Wednesday night, and any rhetoric deemed bearish to commodities. The president's recent statements about his plan for banks have some traders concerned that it could ultimately sideline key commodity investors.

 

Jason Britt, president of Central State Commodities, added that muted fund investment to start the new year has been disappointing.

 

But with prices down almost 70 cents in less than three weeks, traders and analysts said the market is oversold. That is limiting losses, they said.

 

"I think that maybe we are settling into a little bit of a value zone," Britt said.

 

End-user demand should start to pick up, he said. However, Britt and others also note that seasonal trends would have the market continuing to decline into mid-February. That seasonal trend, along with technical pressure, could limit buying.

 

"If you think it's going to be cheaper tomorrow, or next week, you have a tendency to sit on your hands," Britt said.

 

Fundamentally the market is being pressured by big U.S. supplies and favorable South America weather forecasts that should assist what is expected to be a big crop there.

 

Funds sold an estimated 5,000 contracts Wednesday.

 

Traders say there are still a lot of speculative funds holding long positions that have yet to liquidate. One trader said that a dip below support at US$3.54 could chase more of those longs out of the market.

 

CBOT oats futures ended lower. March oats ended down 3 cents to US$2.28 3/4 per bushel and May oats ended down 3 1/4 cents to US$2.37 1/2.

 

Ethanol futures were lower. February ethanol closed down US$0.013 to US$1.785 per gallon and March ethanol settled down US$0.007 to US$1.782.