February 18, 2009

 

CBOT Corn Review on Tuesday: Slides on economy, soy, technical weakness

 

 

Bearish macroeconomic forces, technical weakness and wet weather forecasts for Argentina sent Chicago Board of Trade corn futures lower Tuesday, traders said.

 

March corn ended down 14 cents to US$3.49 1/4 per bushel, May corn ended down 14 1/4 cents to US$3.59, and July corn ended down 14 1/2 cents to US$3.68 3/4.

 

Sharply lower U.S. equities, which flirted with new lows, and crude oil set the tonnee, as traders worried about depressed demand in the face of a global recession.

 

"We continue to have economic concerns, slow demand, and just overall gloom and doom when you're looking at the economy," said Shawn McCambridge, senior grains analyst for Prudential Bache.

 

Sharply lower soybeans, which fell more than 50 cents, also weighed, traders and analysts said. Forecasts calling for widespread rain later this week and into the weekend in Argentina raise questions about how much of the crop can be saved, a trader said.

 

The market had been widely seen as trading between a US$3.50-to-US$4 trading range, but prices Tuesday closed below US$3.50 in the March contract for the first time since Dec. 10. The market has also broken below its key moving averages.

 

"It's tough to find support technically" in the corn market, a trader said.

 

Although there's no bullish news in the market, McCambridge said sellers will not be too aggressive below US$3.50, and that commercial buying should provide support if it breaks lower. A trader added that producers are becoming more reluctant to sell as prices dip further.

 

Strong U.S. export sales during the past month also provide an underpinning of support, analysts add.

 

Heading into the session, there were more than 20,000 open US$3.50 March puts, and that area could become a battleground throughout the week, traders and analysts said. Options expiration is Friday.

 

"The strike price will be a key point to watch unless there's a fundamental reason to trade differently, and right now there really isn't," McCambridge said.

 

CBOT oats futures fell sharply on outside pressure, a trader said. The market gapped lower on the open and set a new March contract low. March oats ended down 8 1/2 cents to US$1.76 per bushel, and May oats ended down 9 cents to US$1.84 1/2.

 

Ethanol futures were lower. March ethanol ended down US$0.054 to US$1.541 per gallon, and May ethanol ended down US$0.054 to US$1.550.