July 15, 2009

 

CBOT Corn Review on Tuesday: Higher amid short-covering, strong basis

 

 

Chicago Board of Trade corn futures ended higher Tuesday in a short-covering rally bolstered by technical support and strong cash prices, traders said.

 

September corn ended up 6 3/4 cents at US$3.38 1/2 per bushel, and December corn ended up 6 cents at US$3.45 1/2.

 

The July contract expired Tuesday at a price of US$3.50, down 9 cents. Traders say July's premium could mean September corn will continue to climb higher.

 

The July contract's pending expiration weighed on prices for much of the morning, but as business in that contract dried up traders started to buy in an effort to prompt short-covering, said Mike Zuzolo, analyst for Risk Management Commodities.

 

"I think the traders really like the discount on the September compared to the July," Zuzolo said.

 

Zuzolo said that crop condition ratings reported in Monday's crop progress report were worse than many had expected and lent support. But other analysts said the crop ratings were either not a factor or slightly bearish.

 

The market has stopped its recent sharp slide, which was prompted by the June 30 government report projecting much more planted acreage than expected. Traders said the market had become oversold. Tuesday, the September contract climbed back above its 10-day moving average.

 

"Technically it's looking a little constructive in the short term," a floor trader said. He said the market could head toward the US$3.50-to-US$3.75 area, "but that's it."

 

Strong cash prices have been supportive, as farmers stopped selling when prices broke sharply. Export sales have been strong this week, analysts added.

 

The strong cash prices could be temporary, some traders and analysts said.

 

"We know producers are going to need some cash flow here as we get to the end of July," Zuzolo said, adding that both old crop and new crop supplies are considered ample.

 

Weather remains a bearish factor, with healthy rainfall and moderate temperatures expected as pollination gets under way. But traders said it's too early in the season to push prices much lower.

 

CBOT oats futures ended lower. September oats settled down 3/4 cent at US$2.18 1/4 per bushel and December oats ended down 1 cent at US$2.30.

 

Ethanol futures were higher. August ethanol was up US$0.016 at US$1.490 per gallon, and September ethanol settled up US$0.014 at US$1.474.