July 8, 2009

 

CBOT Corn Review on Tuesday: Lower in choppy trade; beans sway prices

 

 

Chicago Board of Trade corn futures closed lower Tuesday after a choppy trading day that was heavily influenced by action in soys.

 

July closed down 7 3/4 cents at US$3.35 1/2 a bushel on an outside day on the charts. December closed down 8 1/2 cents at US$3.35 3/4.

 

Corn futures began higher, and then weakened midday as outside markets weighed. The market rallied again later in the day, with July leading the upswing, and then weakened in late trading to close lower. The December contract touched a low of US$3.35, the contract's lowest price point since late December 2006, in late trading. Funds sold an estimated 7,000 contracts.

 

The soy market affected corn's performance throughout the day, traders and analysts said. As beans weakened, the market saw an unwinding of long soy-short corn spreads, said Jerry Gidel, grain analyst with North American Risk Management. While at times that spread-unwinding added support, the bean market's slump - with the most-active November falling to limit down at one point - also weighed on the corn market. "The principal problem with the grain market is overall weakness," said Sterling Smith, market analyst at Country Hedging.

 

Competing factors caused the day's volatility, traders and analysts said. Weakness in crude oil and soys' losses created bearish factors, but zero deliveries in the July contract and bull spreading in corn added support, pulling the market in different directions, a floor trader said.

 

Though the day's volatility didn't depend heavily on weather conditions, analysts said the market is still looking to forecasts for direction. "Our primary focus is on weather," said Shawn McCambridge, senior grains analyst at Prudential-Bache.

 

July is a key month for corn development as pollination occurs during this time. Heat and dry weather can hinder crop development, and so traders were citing forecasts of high temperatures moving into the corn belt as supportive in early trading. However, forecasts look to be favorable. T-storm Weather says temperatures will warm through the end of the week, reaching the mid-90s by Friday in the southwest half of the corn belt. Thunderstorms will form along the heat's northern edge, creating wetness in the northeast half of the belt, the forecast said. The southern half will also see occasional storms, T-storm Weather said.

 

Traders and analysts said the U.S. Department of Agriculture's crop condition ratings released late Monday were slightly supportive to neutral, though the crop's good-to-excellent rating decreased only one percentage point from last week to 71%.

 

"In general the crop is doing quite well across high-yielding areas," McCambridge said.

 

However, McCambridge said things could change. "You can have almost an ideal year up to pollination and really damage the crop if there are adverse weather conditions," he said.

 

CBOT oats closed higher. July oats closed up 1 1/2 cents at US$2.05 a bushel and December closed up 3/4 cents at US$2.25.

 

Ethanol futures closed lower. September ethanol closed down US$0.009 at US$1.469 a gallon and December closed down US$0.010 at US$1.460.