February 4, 2010

 

CBOT Corn Review on Wednesday: Bearish close on stronger dollar, fund selling

 

 

Chicago Board of Trade corn stumbled Wednesday, ending lower on fund selling, outside market pressure and bearish technical momentum.

 

March corn ended down 12 cents, or 3.3%, at US$3.53 a bushel, and May corn ended down 11 3/4 cents at US$3.64 1/2.

 

The market was weak from the outset, unable to extend the week's prior gains as a stronger dollar and weaker crude oil weighed. It ended near session lows.

 

"It felt heavy right from the get-go, and it sure stayed that way," said Jason Britt, president of Central State Commodities.

 

As the market made new lows, it attracted more fund selling, traders said. Funds sold an estimated 10,000 contracts.

 

Modest gains Monday and Tuesday fostered ideas that the market was entering a consolidation mode and could move sideways, but Wednesday's slide to a new four-month low "emphatically" reaffirmed the downward trend, a floor analyst said. Wheat and soy also fell. The floor analyst said that corn bears are now targeting US$3.50, and US$9 is the next downside target in soy.

 

Large supplies are the main bearish factor, and were highlighted again Wednesday when private analytical firm Informa Economics raised its Argentina production estimate.

 

Informa raised its estimate for Argentina's 2009-2010 corn crop by 2.7 million tonnes from last month to 18.2 million tonnes, traders said. It projected Brazil's corn crop at 53.3 million tonnes, up 600,000 tonnes from last month, they said.

 

The USDA in January put Argentina's corn crop at 15 million and Brazil's corn crop at 51 million. The government is due to issue updated supply and demand estimates Tuesday, and the floor analyst said that Informa's numbers affirm that the crop expectations "aren't getting any smaller."

 

In addition to the South American supplies, U.S. supplies are ample. While farmers have refused to sell after recent sharp losses, traders say they will likely be forced to soon, as warmer weather creates more quality problems for corn.

 

CBOT oats ended lower Wednesday. March oats ended down 1 cent at US$2.31 a bushel and May oats settled down 1 cent at US$2.40 1/4.

 

Ethanol futures were lower. February ethanol closed down US$0.007 at US$1.810 a gallon and March ethanol settled down US$0.027 at US$1.781.