July 17, 2008

 

CBOT Corn Review on Wednesday: Rebounds; technical bounce, weather concern

 

 

The potential for a crop-damaging heat wave and technical support helped Chicago Board of Trade corn rebound Wednesday.

 

September corn ended up 10 1/4 cents to US$6.58 1/2 a bushel, December closed up 10 1/2 cents to US$6.77 1/4 and March corn ended up 10 1/4 cents to US$6.95 1/2.

 

Long-range weather forecasts that include the potential for hot, dry weather in the U.S. corn belt helped chase traders with short positions out of what Vic Lespinasse, analyst for grainanalyst.com, called a very sensitive, "mercurial" market.

 

"Weather problems, or even the threat of weather problems, are enough to scare people," Lespinasse said.

 

The market was primed for a technical rebound, analysts said. Prices have fallen from a July 3 close of US$7.77 for the December contract due to favorable crop weather.

 

"We've taken so much premium out of the market, it makes traders think twice about how much they want to push it," said Arlan Suderman, an analyst for Farm Futures.

 

End-users were encouraged to buy at the first sign of a rally, he said.

 

Traders said corn's rebound came without any help from crude oil. Prices had fallen in early trading on another plunge in crude oil prices, which closed down more than US$4.

 

Although the potential for hot, dry weather helped spark Wednesday's rally, traders said the heat wave was far from a sure thing. Mike Tannura, a meteorologist with T-storm Weather, said in his forecast that it's too soon to predict whether a "heat dome" will form, and that even by Friday it would be 4 to 7 days away.

 

"While we realize that everyone wants to know if the ridge will form, we remain cautious because previous heat waves have failed to develop in years past - including many times this year," Tannura said.

 

Suderman said the market has removed the premium from last month's historic flooding.

 

"So that puts us back to where we were in early June, back to where we had to have trend yields to maintain stocks anyway," Suderman said.

 

CBOT oats ended lower. September oats ended down 4 cents to US$4.28 per bushel, December oats were down 3 1/2 cents to US$4.45 1/2 and March oats were down 3 1/2 cents to US$4.63 1/2. A trader said commercial buying provided underlying support, but the market failed to follow corn when it rallied.

 

Ethanol futures were mixed. September ethanol closed up US$0.034 to US$2.619 per gallon and December ethanol closed up US$0.020 to US$2.610.