June 22, 2010

CBOT corn futures take a downturn amid stronger US dollar

Corn futures stumbled Monday (June 21), back-pedalling as a recovery in the US dollar, technical weakness and farmer selling combined to pin prices in negative territory.

Nearby CBOT July corn settled 5 3/4 cents, or 1.6%, lower at US$3.55, and December corn ended 5 3/4 cents, or 1.5%, lower at US$3.74 3/4 a bushel. Speculative funds were estimated sellers of 12,000 lots in corn. Fund activity is a measure of investment money flow in the market.

The market had reached a point of being overbought, with the absence of fresh supportive fundamental news to keep buyers enthused opening the door for a modest price correction. Farmer selling and commercial selling at session highs helped to send prices reversing lower as well.

Futures initially bounced on bullish outlooks for demand, as a change in China's policy on letting the Chinese yuan float sparked optimism of increased US corn exports to China. However, as enthusiasm from the China news faded and the euro and US dollar reversed course, traders rushed to cover positions, said analyst Sterling Smith.

The initial price bounce took prices farther than needed and, without a fresh fundamental boost, prices began to stumble into negative territory. Technical selling helped to accelerate the declines, with pre-placed sell orders triggered once active contracts slipped below major moving average support on technical charts, Smith said.

Looking ahead, traders said the market needs a demand push or adverse crop weather to extend its recent upside movement.