March 12, 2009

 

CBOT Corn Review on Wednesday: Ends lower on technical selling, crude oil

 

 

Chicago Board of Trade corn futures slipped Wednesday, giving back much of the week's gains amid technical selling and pressure from crude oil.

 

March corn ended down 10 3/4 cents at US$3.56 per bushel, May corn ended down 11 cents at US$3.64 1/2 and July corn ended down 11 cents at US$3.74 1/2.

 

The market's slide came despite a government supply-and-demand report Wednesday morning that many analysts considered slightly friendly. The U.S. Department of Agriculture report cut ending stocks due to a projected 100-million-bushel increase in ethanol usage.

 

The report prompted modest gains at the open that failed to hold.

 

Central State Commodities President Jason Britt said the report projections were friendly for corn but not enough to make the market "rock and roll."

 

"They're friendly, but the reality of it is we're still dealing with a carryout of 1.740 (billion bushels), that's still enough corn for right now," Britt said.

 

Shawn McCambridge, senior grains analyst for Prudential Bache, said the USDA's increased projection for ethanol demand was "suspect."

 

"It seems to be a bit anticipatory rather than something we see in the market at this time," he said.

 

Traders and analysts added that technically the market was overbought after recent gains. The market climbed 14 cents in the May contract Monday and Tuesday.

 

The fact that corn couldn't hold a rally after a friendly USDA supply-and-demand report discouraged market bulls, technical analyst Jim Wyckoff said.

 

"When a market cannot rally amid fresh bullish fundamental news, that's a bearish psychological clue," Wyckoff said.

 

Crude oil, which had helped fuel the market's recent strength, reversed course Wednesday, adding pressure to corn.

 

Analysts also noted that the USDA report was not as supportive as it might have initially appeared to some traders, given that it also included an increase in world ending stocks to 144.6 million metric tonnes from 136.7 million.

 

Still, Britt said that if the ethanol market is stabilizing as the USDA report seemed to indicate, that would make it easier to be bullish on corn.

 

CBOT oats futures were lower. March oats ended down 6 1/4 cents at US$1.74 3/4 per bushel, May oats settled down 6 3/4 cents at US$1.81 3/4, and July oats were down 6 3/4 cents at US$1.90 3/4. The USDA supply-and-demand report left oats ending stocks unchanged.

 

Ethanol futures were lower. May ethanol was down US$0.023 at US$1.530 a gallon, and June ethanol was down US$0.030 at US$1.540.