July 10, 2008

 

CBOT Corn Review on Wednesday: Falls on weather; liquidation continues

 

 

A third straight day of fund liquidation, driven by a more optimistic crop outlook, pushed Chicago Board of Trade corn futures lower Wednesday.

 

July corn ended down 9 3/4 cents to US$6.83 per bushel, September corn ended down 9 3/4 cents to US$6.94 3/4 and December corn ended down 9 3/4 cents to US$7.12 3/4.

 

Prices have fallen all week on the absence of excessive heat or dryness in the weather forecast. Technical weakness contributed to Wednesday's continued losses, traders and analysts said.

 

"There are some people who play the trend, and technical signals are bearish right now," said Bill Nelson, grains analyst with Wachovia Securities.

 

Wednesday's losses were more modest, however, than on Monday and Tuesday, and some say the selling may be nearing an end.

 

"The rule of thumb in the past has been three days of liquidation," said Shawn McCambridge, senior grains analyst with Prudential-Bache. "This would be your third day."

 

He noted corn closed above Tuesday's intraday lows. The December contract has also held firm above US$7, which analysts said is an important threshold.

 

An analyst added that outside markets, which had pressured corn and other commodities this week, were "mixed" on Wednesday.

 

However, there is little bullish news to support a rally, traders said. Prices are unlikely to climb significantly unless hot, dry weather forecasts enter the picture or the government issues a bullish report.

 

The trade is awaiting Friday's supply and demand report from the U.S. Department of Agriculture, and market participants are consolidating their positions ahead of the report and the weekend.

 

McCambridge said traders are going to be especially careful about their positions headed into the weekend given activity before and after the July 4th holiday weekend. Prices rallied prior to the weekend on long-range weather forecasts calling for a hot dryspell. But those forecasts fizzled out over the weekend, prompting steep drops Monday and Tuesday.

 

Analysts estimate that the USDA will increase 2007-08 marketing year corn stocks on Friday to 1.514 billion bushels, up from its estimate of 1.433 billion bushels in June.

 

The analysts estimate, on average, that 2008-09 ending corn stocks will increase to 820 million bushels, up from the government's June estimate of 673 million bushels.

 

CBOT oats futures were lower. July oats closed down 3 1/2 cents to US$4.23 1/2 per bushel, September oats closed down 3 1/2 cents to US$4.33 1/2, and December oats closed down 3 1/2 cents to US$4.49 1/2.

 

Ethanol futures closed lower. September ethanol ended down US$0.036 to US$2.714 per gallon and December ethanol closed down US$0.015 to US$2.750.