April 19, 2008

 

CBOT Corn Review on Friday: Down on fund sales, overbought condition

 

 

U.S. corn futures closed modestly lower Friday but up from their weakest levels of the day, on speculative selling amid an overbought market and after prices had already factored in bullish news, traders and analysts said.

 

Nearby May pit-traded corn lost 4 cents to settle at US$5.99 1/2, July was down 4 cents to US$6.13 and new-crop December lost 3 1/4 cents to end at US$6.22 3/4 a bushel.

 

Sharp, early losses in crude oil sparked a round of fund selling in corn to begin the day, but the energies later reversed and wound up making new all-time highs, which uncovered buying and short-covering interest in the grains, an analyst said.

 

While participants remain concerned that cool, wet weather may continue to delay plantings, corn futures had already made record highs earlier this week on those worries and on general commodity strength.

 

"I think everybody knows that we have a weather problem out here; also I think they know they have wet, delayed plantings but gradually you're going to get the crop planted," said Jason Roose, analyst at U.S. Commodities in Des Moines.

 

Therefore, with prices still at lofty levels, traders decided to book profits ahead of the weekend.

 

Roose said the market will need a fresh dose of bullish fundamental news to keep rallying prices, and if the U.S. dollar continues to firm and if crude oil would sell-off, there would be plenty of downside potential in corn.

 

Some analysts have said increasing demand for livestock feed, exports and ethanol suggest the market needs more than 86 million acres of corn this year, and many farmers in the fringe areas of the corn belt will need to make rapid progress if additional acres are to be realized.

 

"Once the planting delay becomes long enough, farmers are confronted with the decision to continue planting corn or switch to beans. Because of the smaller amount of rain and hotter temperatures of the southern corn belt, farmers have to make the decision to switch plantings much earlier than farmers from Iowa northward," said Bill Nelson, analyst with Wachovia Securities in St. Louis.

 

And if the corn does get planted, possibly due to the incentive of high prices, there will be more yield risk the later it goes into the ground, he said.

 

In weather news, showers continue to move through the corn belt Friday, affecting Wisconsin, Iowa, eastern Missouri and western Illinois and locations farther south. A substantial warm-up will occur this weekend over the Plains and will spread eastward across much of the Midwest early next week, which may allow some farmers to get into the fields, private forecaster T-storm Weather said.

 

The warmth will occur in advance of a strong system that will bring snow to some areas of the northern Plains. Cooler air will sweep over the Midwest, along with a few thunderstorms, with another wet weather event to follow.

 

In other markets, CBOT oat futures fell slightly on positioning ahead of the release of Statistics Canada's seeding estimates on Monday, a floor trader said. Planted area for oats is expected to be 4.48 to 5.1 million acres, down from 5.408 million last year. May oats fell 1/2 cent to US$3.78 a bushel.

 

Ethanol futures closed firmer. May ethanol gained 1.4 cents to US$2.555 per gallon, and June added 1 cent to US$2.49.