June 5, 2009

 

CBOT Corn Review on Thursday: Strong gains on fund-buying, crop worries

 

 

Chicago Board of Trade corn surged Thursday, taking back almost all of the ground it lost on Wednesday's plunge on outside market support, analysts said.

 

July corn ended up 16 cents to US$4.48 1/2 per bushel, September corn ended up 15 3/4 cents to US$4.58 1/4, and December corn ended up 16 1/2 cents to US$4.71 1/2.

 

The move was mostly driven by investors' money flow, traders said, as a weaker dollar was bullish for commodities generally. Crude oil was stronger, which is supportive because of corn's tie to energy through ethanol. Funds bought an estimated 9,000 contracts.

 

Traders and analysts also noted that the market had kept its upward trend intact despite Wednesday's losses.

 

"People are seeing the dip as a buying opportunity," said Joel Karlin, analyst with Western Milling,. He added that the market will continue to find support "until there's a better feel that the crop is in the ground, we're going to produce a decent crop, and as long as the dollar continues to turn lower."

 

The market has underlying fundamental support from the crop, which has been planted late and is being hindered by unseasonably cool weather, traders said.

 

Some analysts say that the crop concerns are overblown, and that relatively weak demand, highlighted by lackluster weekly export sales Thursday and dwindling prospects for the livestock industry, will limit the market's gains.

 

But traders say corn fundamentals have taken a back seat for the moment as the dollar's direction and fund activity dominate the market. The market's wide swings are prompting comparisons to last year's historic rally. After losing 17 cents Wednesday amid ideas the market was overbought, July corn gained all but one cent back on Thursday.

 

Fund activity will determine where the market stops climbing, a trader said.

 

"We did this before," he said. "I'm not even got to try and pick a top."

 

CBOT oats futures ended higher. July oats ended up 8 1/4 cents, to US$2.63 1/2 per bushel, and December oats ended up 8 1/4 cents, to US$2.84 3/4.

 

Ethanol futures were higher. July ethanol ended up US$0.043 to US$1.791 per gallon and September ethanol ended up US$0.022 to US$1.792.