April 30, 2008

 

CBOT Corn Review on Tuesday: Drops ahead of US fed decision Wednesday

 

 

Chicago Board of Trade corn futures dipped Tuesday as traders anticipated a Federal Reserve interest rate decision Wednesday that could bolster the dollar.

 

May corn closed down 8 3/4 cents to US$5.91 1/2, July closed down 9 cents to US$6.04 1/2 and December closed down 8 1/4 cents to US$6.22 a bushel.

 

Jerry Gidel, a grain analyst with North American Risk Management Services, said expectations that the Fed would signal an end to the recent interest rate cuts "wore down" the grain markets, including corn. Some expect that decision would bolster the dollar, hurting commodity prices.

 

A lack of planting progress, which had rallied corn futures Monday and overnight into Tuesday, will remain a concern, Gidel said. The U.S Department of Agriculture's crop progress report showed only 10% of corn was planted through Sunday, well below the 35% average. Gidel expects that total plantings will be lucky to reach 25% by the next report, due Monday.

 

"You'll have 25% when you should be looking at 50%," he said.

 

John Kleist, an analyst and broker at Allendale Inc. in McHenry, Ill., said the continued backlash against ethanol is also keeping corn prices down.

 

"It's getting bad press, it's getting political heat," he said, adding that there have been reports of some ethanol plants laying off workers.

 

But Gidel said he doesn't think that's playing much of a role yet. The market is more focused on a May 9 supply and demand report from the USDA.

 

"(Ethanol critics) will be more of a worry after we see the numbers on the ninth," he said.

 

Traders said there was also profit-taking after Monday's gains. Funds sold 5,000 corn contracts.

 

First notice day for May corn is Wednesday, and analysts expect 1,000 to 2,000 lots to be delivered amid an environment of weak basis levels, favorable carry rates and concerns over the slow U.S. planting pace.

 

CBOT oat futures slipped with the rest of the grain floor. Commodity funds sold the market after buy stops were triggered overnight, a floor trader said.

 

First notice day for May oats is Wednesday. Deliveries are expected to be "light" amid low open interest, a trader said. May oats closed down 10 cents at US$3.68 1/2 per bushel, and July oats ended down 10 1/4 cents at US$3.78 3/4.

 

Ethanol futures ended lower. June ethanol fell 2.4 cents to US$2.431 per gallon, and July ethanol dropped 3.3 cents to US$2.412.