May 30, 2008

 

CBOT Corn Review on Thursday: Drops on crude; CFTC causes concern

 

 

Chicago Board of Trade corn futures ended the day lower Thursday on outside market forces, settling at the edge of a two-month trading range, traders said.

 

July corn ended down 10 1/4 cents to US$5.82 1/4 per bushel, September corn fell 10 1/4 cents to US$5.95 1/4, and December corn finished 10 cents lower at US$6.09 1/2 a bushel.

 

Corn followed crude oil and soybeans lower, traders said. They said there is also growing concern that the government will take action to limit the role of speculative funds in the commodities markets.

 

That fear was fueled Thursday by the Commodity Futures Trading Commission's announcement that it was in the midst of a six-month investigation into possible price manipulation in U.S. oil markets. Traders say that fear could be fueling liquidation by index funds.

 

"That slowly weighed on corn, and became too much to hold the edge of a two-month range," traders said.

 

But observers also said it's too soon to assess what action the government might take, if any.

 

Prices ended several cents higher than session lows, but a trader said the market would continue to experience downward momentum.

 

"We didn't go straight up, we're not going to go straight down," a trader said. "But the big money is leaving, and that's what's driving this thing."

 

December corn failed to close above its 50-day moving average for the first time since late March.

 

Corn still has strong fundamentals, analysts and traders said, and the condition of the crop could continue to support prices. Emergence is behind schedule, and parts of the U.S. corn belt, including Iowa, southern Illinois and southern Indiana, have received considerable rain in recent days.

 

Wachovia Securities grains analyst Bill Nelson said he noticed poor emergence and many fields covered in standing water during a trip between Chicago and St. Louis this week. Many farmers are having to consider replanting corn or switching to soybeans.

 

Late-planted corn is at greater risk for yield loss because it is likely to pollinate during the hottest part of the summer.

 

"Clearly it is impossible to talk about normal yields for corn planted June 1, which is Sunday," Nelson said.

 

CBOT oats futures were lower on outside markets, a trader said. July oats were down 8 cents to US$3.82 per bushel, September oats were down 7 1/2 cents to US$3.93 1/2, and December oats were down 9 cents at US$4.09.

 

Ethanol futures were lower. June ethanol was down US$0.107 to US$2.391 per gallon, and July was down US$0.082 to US$2.373.