March 3, 2009

 

CBOT Corn Review on Monday: Losses sympathetic with negative outside markets

 

 

Chicago Board of Trade corn futures moderated their slide Monday, but still succumbed to negative outside markets. Front contract months finished the day with single-digit losses.

 

March corn dropped down 7 1/4 cents to US$3.43 1/2. The most actively traded May corn contract lost 8 3/4 cents to US$3.50 1/4. The contract traded a 7 1/2-cent range, topping at US$3.52 1/4. July corn shed 9 cents to US$3.59 1/2.

 

Speculative funds sold an estimated 6,000 CBOT corn contracts, according to midday-close estimates.

 

"Gloom, despair and downright depression has gripped the financial markets this morning as the U.S. government poured another US$30 billion into AIG to prevent systemic risk in the world financial markets," AgResource Company said in a midday market overview. "The revelation of new funding for AIG suggests that the crisis is not yet over, which is keeping new buying on the sidelines. Funds have been sellers - which keeps prices heading lower."

 

Weekly export inspections of 31.39 million bushels reported Monday by the USDA were better than the 24 million to 30 million bushels anticipated by analysts polled by Dow Jones.

 

Despite better-than-expected inspections report, corn - and the rest of the agricultural commodities - remained beholden to the negativity of outside markets.

 

"The outside markets are like the canary in the coal mine as far perceptions of what of export demand will be and domestically what domestic feed demand will be," said John Kleist, a broker/analyst at Allendale. "That has been a negative factor of psychology in the market.

 

"It's normal to see front-month open interest decline in the delivery period, but we started last week to see liquidation in May," he said. "The market's giving up the ghost saying 'Let's get get out of here and see if something happens later'."

 

The May contract took out its February low and the technical signals indicate it's headed for the US$3.20 level, a CBOT floor trader said.

 

"Most people still think we're still over-valued, especially if we have a normal growing season," he said, noting "farmers still own too much grain.

 

"Unless something happens to bolster equities, agricultural commodities will trend lower."

 

In other markets, CBOT May oat futures closed down 3 cents at US$1.91 a bushel.

 

Ethanol futures closed down US$0.030 cents to US$1.510 a gallon in the nearby March contract. May ethanol dropped US$0.045 cents to US$1.510.