July 16, 2008

 

CBOT Corn Review on Tuesday: Down on crude; technicals a 'mess'

 

 

Chicago Board of Trade corn futures ended lower Tuesday, failing to recover after being "ambushed" by plunging crude-oil prices.

 

September corn ended down 15 1/2 cents to US$6.48 1/4, December corn ended down 15 1/2 cents to US$6.66 3/4 and March 2009 corn ended down 15 cents to US$6.85 1/4.

 

Prices in corn, along with other commodities, fell early in trading after crude oil plummeted more than US$9, analysts said. Crude settled more than US$6 lower, its largest dollar drop since 1991.

 

"Crude oil took in a huge gulp of air and choked everything else down," Jerry Gidel, analyst for North America Risk Management Services.

 

The market continued to erase gains from its June rally on historic flooding, as the December contract closed below the 50-day moving average for a second straight day. Prior to Monday it had not closed below that average since March, and then only for one day.

 

"Technically, we're still a mess," a trader said. "The only thing we've got going for it is that it's potentially oversold."

 

On July 2, prices closed higher by almost 30 cents, the daily trading limit, on concerns about a potential heat wave in the long-range forecast. Since that July 2 close at US$7.80 1/2 for December corn, prices have ended higher seven of eight days.

 

Traders are very sensitive to the weather now but are finding little bullish news in forecasts. A rally is unlikely until and unless a hot, dry weather pattern emerges that could place the crop in danger, traders and analysts said.

 

Analysts had expected a technical rebound today on oversold conditions and overnight gains, but the drop in energy prices halted any upside momentum.

 

One trader said that the broader economy is starting to pressure commodities. A developing deflationary environment could damp demand, he said.

 

CBOT oats futures ended lower on fund selling and pressure from other markets, a trader said. September oats were down 7 1/2 cents to US$4.32 per bushel, December oats were down 8 1/2 cents to US$4.49 and March oats were down 7 1/2 cents to US$4.67. The trader said commercial buyers gave underlying support to the December and March contracts.

 

Ethanol ended lower. September ethanol fell US$0.101 to US$2.585 per gallon, and December ethanol was flat at US$2.675.