June 4, 2009

 

CBOT Corn Review on Wednesday: Falls sharply amid outside pressure

 

 

Profit-taking and intense pressure from outside markets pushed Chicago Board of Trade corn futures lower Wednesday.

 

July corn ended down 17 cents to US$4.32 1/2 per bushel, September corn ended down 17 1/4 cents to US$4.42 1/2 and December corn ended down 17 3/4 cents to US$4.55.

 

The market had climbed over the previous four days. It opened lower Wednesday in a correction from recent gains, but it was "holding up pretty well" for much of the day, according to traders, until outside pressure and selling from trend-following funds caused corn to succumb, traders said.

 

Wheat contracts tumbled by about 50 cents, and soybeans were 25-35 cents lower. Bearish outside macro markets, particularly a rebounding dollar and weaker crude oil, helped set the tonnee, traders said.

 

"This should not be a shock to anyone to see some profit-taking come into the marketplace and some technical selling," said Tom Leffler, owner of Leffler Commodities in Augusta, Kan.

 

Funds sold an estimated 14,000 contracts, and Wednesday's plunge sent both July and December corn below their 200-day moving averages. A trader said the nearby contract hit sell stops at US$4.41 and US$4.35, extending the slide.

 

Despite the dip, traders and analysts mostly said that the market remains on an upward trend.

 

"Today's break does not mean that the rally is over," Farm Futures analyst Arlan Suderman said in a market commentary.

 

With the slide the market brushed aside what most considered to be an underlying supportive feature: concerns about the crop. The weather was seen by many traders as at least mildly supportive, as wet weather forecasts will continue to delay farmers in the eastern U.S. corn belt. Traders also noted that chilly weather in the U.S. Midwest will slow development of the crop, which could increase the likelihood that it will run into the summer's most extreme heat while it is still in the crucial pollination period.

 

Market bears have noted that last year's crop turned out fine despite being delayed much like this year's crop. But that took ideal weather in the late summer and early fall, some analysts note.

 

"The odds of that happening two years in a row? Pretty slim," Leffler said. "Mother Nature's not that nice."

 

CBOT oats futures ended lower. July oats ended down 5 1/4 cents to US$2.55 1/4 per bushel and December oats ended down 4 1/2 cents to US$2.76 1/2.

 

Ethanol futures were lower. June ethanol settled down US$0.030 to US$1.750 per gallon and July ethanol closed down US$0.036 to US$1.748.