March 18, 2008

 

CBOT Corn Review on Monday: Down 20 cents limit on broad-based speculative sales

 

 

Chicago Board of Trade corn futures ended sharply lower Monday, dropping to their 20-cent daily trading limit on broad-based commodity selling amid speculative liquidation linked to economic turmoil, analysts said.

 

May corn settled 20 cents lower at US$5.39 1/4, July corn ended 20 cents lower at US$5.51 1/4, and December finished 20 cents lower at US$5.55. Speculative liquidation was the theme of the session, as traders looked to reduce risk associated with holding large positions in the market in the midst of a global credit crunch, analysts said.

 

The uncertainties of the U.S. economy sent buyers running for cover, as a flight to liquidity trumped supportive longer range fundamental outlooks, analysts added.

 

The market is taking a close look at risk management and with bank lending needed to support large speculative market positions reduced or halted, traders looked to free up capital to avert losses in outside markets, analysts said.

 

A sharp drop in crude oil futures weighed on prices as well, with traders viewing the Federal Reserve's cut in the discount rate at an emergency weekend meeting and news of JPMorgan Chase & Co. (JPM) bargain-basement buyout of Bear Stearns Cos. (BSC) reinforcing economic jitters and sending buyers running for cover, analysts added.

 

Meanwhile, spillover pressure from other grain and oilseed markets, and tumbling crude oil futures sent bearish ripples through the market, keeping prices firmly planted in negative territory throughout, traders added.

 

Options trade was featured with futures locked limit down, traders said. The May corn contract was synthetically trading between US$5.27 and US$5.29 at the close, traders said.

 

The market is poised to continue the lower theme overnight based on the synthetic price, as the reassessment of risk is forcing traders to shed market length and look for true market value based on the fundamentals of the market, a CBOT floor analyst said.

 

CBOT oat futures ended sharply lower, with some contracts closing limit down on economic jitters and spillover selling from the rest of the commodity markets, a floor trader said. May oats settled limit down, 20 cents lower, at US$3.72 1/2 per bushel.

 

Ethanol futures settled lower. April ethanol slipped 10.2 cents to US$2.369 per gallon, and May fell 4.5 cents to US$2.390.