June 23, 2009

 

CBOT Corn Review on Monday: Extends slide; fund sales, weather weigh

 

 

Outside market pressure and "greenhouse"-like weather conditions pushed Chicago Board of Trade corn futures lower Monday.

 

July corn ended down 14 cents to US$3.85 1/4 per bushel, September corn ended down 13 3/4 cents to US$3.93 1/2 and December corn ended down 14 cents to US$4.05 1/2.

 

The market has now lost 64 1/4 cents since hitting an intraday high of US$4.49 1/2 on June 10. Prices broke through trend-line support, and hit a fresh seven-week low in the December contract Monday.

 

"Technically these charts are looking toppy now," said Rich Feltes, director of research for MF Global. "And certainly the trend-following fund longs, who exited in a major way last week, are likely to do the same this week unless we see some sort of a turnaround."

 

That liquidation transpired Monday, as funds sold an estimated 13,000 contracts.

 

Analysts said a stronger dollar and weaker crude set a bearish tonnee analysts said. Also weighing was a sharp break in equities, which pointed to "demand destruction" for corn, a trader said.

 

"It's tough to find anything bullish about this market," a trader said.

 

The weather has turned bearish, analysts said. They note that the hotter weather this weekend, with continuing showers, is a good recipe for crop development. Neither the heat nor the rainfall is excessive enough to stress the crop, traders added.

 

"This type of weather - near- to above-average temperatures and rainfall - is generally favorable to crops," said Mike Palmerino, meteorologist with DTN Meteorlogix.

 

The trade was looking for an increase of up to two percentage points in the portion of the crop rated good-to-excellent in Monday's crop progress report. The U.S. Department of Agriculture will issue the report at 4 p.m. EDT.

 

Although the market has broken trend-line support, some analysts say the downside potential is still limited.

 

"Longer term, we still have a long way to go before this crop is in the bin," said Marty Foreman, analyst for Doane Advisory Services.

 

Also, despite the plunge, "the corn market bulls can correctly argue that December futures prices are presently short-term oversold and due for an upside corrective bounce very soon," technical analyst Jim Wyckoff said.

 

CBOT oats futures ended lower Monday. July oats were down 8 1/2 cents to US$2.03 1/2 per bushel and December oats settled down 8 1/2 cents to US$2.26 1/2.

 

Ethanol futures were lower. July ethanol ended down US$0.028 to US$1.650 per gallon and September ethanol settled down US$0.037 to US$1.656.