June 16, 2009

 

CBOT Corn Review on Monday: Stumbles; outside pressure, technical selling

 

 

Bearish outside markets accelerated a slide in Chicago Board of Trade corn futures Monday, as prices fell sharply for the second straight day.

 

July corn was down 19 1/2 cents to US$4.06 per bushel, September corn was down 19 3/4 cents to US$4.14 3/4 and December corn was down 20 cents to US$4.27 3/4.

 

Technical liquidation, prompted by the market's dip below key moving averages and pressure from outside macro markets drove the market lower, traders said. Equities were sharply lower, the dollar was higher and commodities across the board fell.

 

The July contract has lost 24 1/2 cents during the past two sessions, and ended near session lows Monday. A trader said while he is "not enamored with the phrase 'Turnaround Tuesday,'" that's what traders are likely to see Tuesday, provided the outside markets don't apply heavy pressure again.

 

"We're probably a little overdone," he said.

 

Tom Leffler, owner of Leffler Commodities, said a correction after the market's recent strength was to be expected, but "I don't think in the big picture we've changed the trend yet." Monday's drop had more to do with broad-based selling of commodities generally, he said. He added there's little chance the late-planted crop will enjoy the same ideal weather for the second half of the growing season that it did last year.

 

But analysts and traders said now that the crop is planted, the market is likely to remain under pressure as long as farmers get good weather.

 

"If we don't see heat on the horizon, this market is done," said a trader who sees the market potentially heading toward US$3.50.

 

Weather in the U.S. corn belt was mostly considered bearish. The U.S. corn belt will see widespread showers and thunderstorms this week, beginning Monday and lasting until early Wednesday, according to a Storm Exchange forecast. The area will see a brief break, but more storms are possible by Thursday into Friday, when a cold front could cross the region and possibly produce more rainfall into Saturday.

 

The area will also see much warmer temperatures this week, according to the forecast. Analysts say the crop needs the warmer weather to boost development of a late-planted crop.

 

Funds sold an estimated 10,000 contracts Monday.

 

The trade was awaiting Monday afternoon's U.S. Department of Agriculture crop progress report, which was expected to show 70% to 72% of the crop rated in good-to-excellent condition, up from 69% last week.

 

CBOT oats futures ended limit down. July oats ended down 20 cents to US$2.18 1/2 per bushel and December oats ended down 20 cents to US$2.41 1/2. A trader said the market followed the stronger dollar and losses in other markets. He said Tuesday's expanded trading limit would be 30 cents.

 

Ethanol futures were lower. July ethanol ended down US$0.041 to US$1.727 per gallon and September ethanol ended down US$0.034 to US$1.725.