July 15, 2008

 

CBOT Corn Review on Monday: Down sharply as weather remains favorable

 

 

Weather patterns continued to weigh on Chicago Board of Trade corn futures Monday, with prices closing sharply lower in a rare close below the 50-day moving average.

 

September corn ended down 27 1/4 cents to USUS$6.63 3/4 per bushel and December corn ended down 27 cents to USUS$6.82 1/4. The July contract expired Monday, with prices down 23 cents to USUS$6.57.

 

The drop in prices from a July 3 close of USUS$7.77 for the December contract has inflicted technical damage to the market, analysts said. Prices closed near session lows Monday.

 

"You've changed the complexion of the market near-term with weather," said John Kleist, broker/analyst with Allendale in McHenry, Ill.

 

Prices closed below the 50-day moving average for the first time since March 20 and just the second time since October. Two previous drops below the 50-day moving average proved to be a "false breakout," Kleist said, and it remains to be seen if the same will hold true this time.

 

In addition to the weather, expectations the government is going to work to strengthen the dollar pressured the market, analysts said. Analysts said the government's willingness to set up a safety net for mortgage lenders Fannie Mae and Freddie Mac could help strengthen the dollar, which would be bearish for commodities.

 

But both factors, the weather and the firmer dollar, are tenuous, said Mike Zuzolo, senior analyst for Risk Management Commodities.

 

"To me, you have very loose footing on both of those," Zuzolo said.

 

Although weather currently is bearish, some traders and analysts said the potential for a period of hot, dry weather a couple weeks from now bears watching. Traders and analysts say that type of weather pattern is about the only news that could rally corn until the U.S. Department of Agriculture releases updated production estimates Aug. 12.

 

"It might be two steps down and one step up going into that next crop report," said Don Roose, president of U.S. Commodities in Des Moines.

 

Analysts expect the USDA to show an improvement of 1 to 3 percentage points in the crop rated good or excellent in Monday's weekly crop progress report, which is scheduled to be released at 4 p.m. EDT.

 

CBOT oats ended lower. September oats ended down 10 cents to USUS$4.39 1/2 and December oats ended down 10 cents to USUS$4.57 1/2.

 

Ethanol futures also ended lower. September ethanol was down USUS$0.037 to USUS$2.686 per gallon and December ethanol was down USUS$0.056 to USUS$2.675.