July 9, 2008

 

CBOT Corn Review on Tuesday: Lower on weather; continued liquidation

 

 

A newly optimistic crop outlook and pressure from outside markets pressured Chicago Board of Trade corn sharply lower for the second straight day Tuesday.

 

July corn closed down 23 3/4 cents to US$6.92 3/4, Sep closed down 23 1/4 cents to US$7.04 1/2 and Dec closed down 24 1/2 cents to US$7.22 1/2.

 

Funds continued to liquidate as the market removed a weather premium, traders said. Outside markets were also bearish, with crude oil falling for the second straight day.

 

Prices rebounded from intraday lows reached in early trading. December had traded as much as 45 cents lower, the exchange's expanded daily limit.

 

"It met what appeared to be a decent end-user price for December, and that stemmed the tide," a trader said.

 

Traders and analysts said the rebound may have been fueled by profit-taking by those with short positions, given that the market had dropped more than 70 cents since the close of trading last week.

 

But a couple of traders said they didn't think the fund liquidation was over yet.

 

"I'd be very surprised if we don't have a moderate decline in open interest tomorrow," one trader said.

 

Traders and analysts say there is talk that yields could now exceed 150 bushels per acre, up from the U.S. Department of Agriculture's estimate of 148.9 bushels per acre last month. On Monday, Informa Economics projected the average yield at 152 bushels per acre.

 

Some analysts said the market may have reacted too harshly last week to some weather forecasts calling for a period of hot, dry weather, and may have overreacted this week to weather forecasts that are favorable for the crop.

 

Because the crop was planted late, it will remain vulnerable to the weather for months, with potential danger from heat and then early frosts.

 

"I don't care what happens in the next 10 days, it doesn't mean anything," said Jerry Gidel, analyst with North American Risk Management Services.

 

Mike Tannura, meteorologist with T-storm Weather, said "it remains unlikely that an intense heat wave with unusual dryness should develop across most of the Corn Belt through at least next week and probably longer."

 

CBOT oats ended lower, but rebounded off of session lows. July oats closed down 8 cents to US$4.27 per bushel, Sep oats closed down 10 3/4 cents to US$4.37 and Dec closed down 13 cents to US$4.53. A trader said lower prices began to attract commercial buying, sparking the rebound.

 

Ethanol futures were lower. September ethanol closed down US$0.50 to US$2.750 per gallon and December ethanol closed down US$0.027 to US$2.765.