February 17, 2010

 

CBOT Corn Review on Tuesday: Ends up on supportive dollar, cash market

 

 

CBOT corn futures ended higher amid a widespread rally in commodities on a weaker dollar.

 

March corn ended up 5 3/4 cents, to US$3.67 1/4 per bushel, and May corn closed up 5 3/4 cents, to US$3.79.

 

Wheat and the soy complex led the way higher, as commodities in general climbed on a weaker dollar and surging crude oil.

 

Traders said there was little fundamental reason for the climb, and that funds seemed to decide in unison it was time to buy commodities. Funds bought an estimated 10,000 contracts Tuesday.

 

After posting gains last week, the market is in a stable technical position, and the strength has prompted short-covering, analysts said.

 

In addition to the dollar, corn was supported by tight basis, or the difference between cash and futures prices. The firm cash prices have been driven by farmers' reluctance to sell at prices more than 50 cents off of January's highs, analysts said.

 

Mike Zuzolo, president of Global Commodity Analytics and Consulting, added that low test weights in the 2009 U.S. crop are also helping basis, because livestock producers are having to use more feed.

 

He said one client told him the 9,100 bushels of corn he fed his hogs seemed like feeding them only 8,500 due to the low test weights.

 

"That's drawing down pipeline supplies in the corn," Zuzolo said.

 

The market briefly topped its February high, but would need to close above that level of US$3.68 1/4 to indicate more upside, Zuzolo said.

 

Fundamentally the market's upside is limited due to large U.S. supplies and big crops that are expected in South America. Traders add that demand, particularly export demand, is unspectacular.

 

CBOT oats ended higher. March oats ended up 3 1/4 cents, to US$2.36 per bushel, and May oats closed up 3 1/4 cents, to US$2.45.

 

Ethanol futures were higher. March ethanol closed up US$0.018, to US$1.718 per gallon, and April ethanol settled up US$0.016, to US$1.720.