June 25, 2008

 

CBOT Corn Review on Tuesday: Lower on outsides, upside exhaustion

 

 

Chicago Board of Trade corn futures closed lower Tuesday on outside weakness and an absence of bullish news, traders said.

 

July corn was down 11 3/4 cents to US$7.12 1/2 per bushel, September corn was down 11 3/4 cents to US$7.27, and December corn was down 11 3/4 cents to US$7.47 1/2.

 

A floor analyst who had expected prices would climb on rainy weather forecasts said "the market may just be tired" after climbing to new records earlier this month.

 

"The market acted like it knew something we didn't, and down it went," he said.

 

One factor potentially weighing on the market, traders said, was concern about government intervention into the commodities markets.

 

Prices climbed early in the day but ran into technical resistance just above Monday's high, said Joel Karlin, an analyst with Western Milling Quality Feeds. A trader said corn followed soybeans lower. A break in crude oil also pressured prices for much of the day, traders said.

 

Traders had mixed views on weather forecasts calling for rain across the U.S. corn belt later this week. Mike Tannura, a meteorologist with T-storm Weather, said rainfall will move across the Midwest from Thursday afternoon to Saturday morning.

 

He noted that a current model predicts 7 inches of rain in Cedar Rapids, Iowa, which has already suffered extensive flooding. Although the model isn't reliable enough to forecast that amount of rain in that location, it does indicate rainfall amounts could be locally heavy.

 

"When it shows something like that, the location may not be right, but it's telling you something," Tannura said. "It tells you something big is about to happen."

 

His current forecast calls for "localized field flooding," especially in areas that are already saturated. But he said the overall effect on the corn crop was "debatable," because some areas will benefit from the rain.

 

Karlin said despite a recent drop in prices and an absence of new bullish news, the potential for further crop losses remains. The crop will be ill-equipped to handle a drought, and the first freeze could cause damage even if it's not early.

 

CBOT oats closed slightly higher and "performed well" given the drop in other commodities, a trader said. He said prices were supported by Stats Canada's report that planted oats acreage dropped 19% this year. July oats were up 1/2 cent to US$4.20 per bushel, September oats were up 1/2 cent to US$4.32 1/2 and December oats were up 1 cent to US$4.50 1/2.

 

Ethanol futures were lower. July ethanol was down US$0.031 to US$2.831 per gallon and December ethanol was down US$0.034 to US$2.801.