June 21, 2008

 

CBOT Corn Review on Friday: Falls on acreage report, profit-taking

 

 

A mild correction in Chicago Board of Trade corn futures continued Friday, as the market was pressured by a lack of bullish weather news, profit-taking and a private firm's increased projection for planted corn acreage, analysts said.

 

July corn was down 6 1/2 cents to US$7.21 1/4 per bushel, September was down 6 1/4 cents to US$7.35 1/2 and December was down 6 cents to US$7.55 1/2.

 

The market was overbought after climbing vertically on U.S. corn belt floods, said Arlan Suderman, an analyst with Farm Futures, and with some fields drying out, the rally that has pushed corn to new record highs has stopped for now.

 

"We don't have a flood of bullish fodder to keep fueling it," Suderman said. "We were due for a correction."

 

There could be more consolidation next week leading up to the U.S. Department of Agriculture's planted acreage report, especially if the weather remains dry, Suderman said. But he remains bullish on corn due to the flooding and its effect on the crop.

 

Corn initially climbed Friday. Its downturn followed the release of an Informa Economics report that projected corn planted acreage at 87.4 million acres, up from its estimate of 87.2 million acres a month ago.

 

Traders questioned the accuracy of the report. They were expecting the projection to drop given the historic flooding, which included virtually the entire state of Iowa, the top corn-producing state.

 

"I don't know how they put out numbers like that," a trader said. "I'm sure it didn't incorporate the flood."

 

But the report states that it reduced its projection by 900,000 acres due to moisture in the first two weeks of June. Suderman said he didn't believe the analytical firm's projection, but that it was "the straw that broke the camel's back," precipitating a downturn that was likely to happen Friday anyway.

 

The trade is looking ahead to the June 30 USDA report as an important indicator of crop damage. The USDA has decided to extend its survey period next week in an effort to gauge the flood's impact.

 

An analyst said the market may also be feeling pressure from signs that inflation is starting to impact China and India. That could put the brakes on those economies, which are seen as being key to the commodities boom.

 

CBOT oats futures were slightly higher. July oats closed up 2 1/2 cents to US$4.15 1/2 per bushel, September oats closed up 3 cents to US$4.28 and December closed up 3 1/4 to US$4.45 1/4.

 

Ethanol futures were higher, with July ethanol up US$0.052 to US$2.900 per gallon.