June 13, 2009

 

CBOT Corn Review on Friday: Falls on dollar, breaks below support

 

 

A stronger dollar and technical selling pushed Chicago Board of Trade corn sharply lower Friday, as the market plunged through support areas.

 

July corn was down 15 1/2 cents to US$4.25 1/2 per bushel, and December corn ended down 15 1/2 cents to US$4.47 3/4.

 

The focus of the market is squarely on outside markets, particularly the dollar and crude oil, traders and analysts said.

 

Corn fell the three days the dollar climbed this week and it rose the two days the dollar fell, noted Chad Henderson, analyst for Prime Ag Consultants.

 

"I think coming in Sunday night you're better off looking at what the dollar is doing for direction in the corn market than what the weather forecast is," Henderson said.

 

Traders noted that for what it's worth, warmer weather forecast for next week is bearish, although they said bulls are talking up the possibility of a bout of hot, dry weather in longer-range forecasts.

 

"The general feeling is the weather is going to be favorable for corn development at this point now," said Mario Balletto, Citigroup analyst.

 

The market opened lower and fell below its 20-day and 200-day moving averages, triggering sell stops along the way, traders said. A trader noted that a dip below the 200-day moving average for December in electronic trade triggered a large sell stop that took screen prices 10 cents lower than in the pit.

 

Funds sold an estimated 9,000 contracts.

 

Although corn rebounded 4 to 5 cents going into the close, traders said the market's action was still bearish technically. July corn lost 18 1/2 cents on the week.

 

A trader said funds are "letting the air out" of commodities as the dollar climbs. He added that there is optimism that the crop will turn out fine despite a late start, just as it did last year.

 

Bears say the market's move since Wednesday's supply and demand report could signal a reversal in the market, with prices headed toward US$4 or below in the July contract unless the weather provides a big boost. They note that demand is not strong enough to maintain prices around US$4.50.

 

Henderson said that in the December contract traders will now target support levels around US$4.36 and US$4.39.

 

CBOT oats futures ended lower. July oats ended down 6 cents to US$2.38 1/2 per bushel and December oats ended down 6 cents to US$2.61 1/2. The July contract lost 17 1/2 cents on the week.

 

Ethanol futures were lower. July ethanol was down US$0.017 to US$1.768 per gallon and September ethanol was down US$0.036 to US$1.759.