July 9, 2009

 

CBOT Corn Review on Wednesday: Mostly modest losses under outside market weight

 

 

Chicago Board of Trade corn futures closed mixed but mostly lower Wednesday as the market searched for guidance in weaker outside markets.

 

July closed up 3 3/4 cents at US$3.39 1/4 a bushel and December closed down 1 1/2 cents at US$3.34 1/4.

 

The market started modestly stronger on a corrective bounce from Tuesday's sell-offs, but it couldn't maintain the gains. The December contract touched a session low of US$3.32, last seen for that contract in mid-December 2006.

 

The market was seen as oversold Tuesday and the corn market was expected to post light gains in a recovery Wednesday, analysts said. But corn felt the pressure from other markets.

 

"Corn continues to be a follower," said Mike Zuzolo, a senior analyst at Risk Management Commodities. He said corn looks for guidance in other grains, and "without wheat really jumping," it followed soys. "[Corn] is treading water," he said.

 

Crude oil also weighed on corn. "I think the weakness in crude probably prevailed," said Terry Reilly, an analyst at Citigroup.

 

The market attempted to shrug off crude's weakness early on, but succumbed in late trade. "It won't help corn if the energy market continues to leak," a floor trader said.

 

The July contract held some of its early gains. "The old crop has a cash squeeze right now," Zuzolo said, adding that a lack of selling by farmers added support as well.

 

Some analysts said the trade is gearing up for Friday's U.S. Department of Agriculture supply-and-demand report. "People who are short [corn] will likely square up positions before the report," said Sterling Smith, a market analyst at Country Hedging.

 

A Dow Jones Newswires survey of 18 analysts showed that on average, the trade expects old crop carryout to increase modestly from the USDA's June estimate of 1.600 billion bushels. For new crop carryout, the trade expects on average a more significant increase of about 1.567 billion bushels from the USDA's June estimate of 1.090 billion.

 

Some analysts mentioned weather as continuing to be favorable. However, a floor trader said he didn't think weather was a major factor in Wednesday's action.

 

CBOT oats closed lower. July oats closed down 3 1/2 cents at US$2.01 1/2 a bushel and December oats also closed down 3 1/2 cents at US$2.21 1/2.

 

Ethanol futures closed lower. September ethanol closed down US$0.003 at US$1.466 a gallon and December closed down US$0.006 at US$1.454.