July 17, 2009

 

CBOT Corn Review on Thursday: New low as ideal weather dominates

 

 

Ideal weather and an optimistic crop outlook took another chunk out of Chicago Board of Trade corn prices Thursday, as the nearby month set a new contract low.

 

September corn set a new low at US$3.16 1/4 and ended down 12 3/4 cents at US$3.16 3/4. December corn ended down 12 1/4 cents to US$3.25 1/4.

 

The Midwest's moderate temperatures and ample rainfall are the main influence in the market currently, analysts say.

 

"Corn loves cool weather," said Western Milling analyst Joel Karlin. "And the crop is pollinating under just ideal circumstances."

 

While export sales have been solid at current price levels, concerns about feed demand persist. Traders noted that Tyson Foods Inc. (TSN) announced Wednesday it was reducing its sow herd by 30%.

 

A weaker soy market also weighed on corn, said Tom Leffler, owner of Leffler Commodities. Both corn and soys were pressured by China's announcement that it would sell supplies of both crops next week.

 

Some analysts have said that corn could break below US$3 by harvest if the good weather persists. But at the current pace it could get there sooner rather than later, said Western Milling analyst Joel Karlin.

 

"I'm wondering where this thing could go, because we often overshoot our target, too," he said.

 

But Leffler and others expect the market will rebound, as it is too soon to take a strong crop for granted. Leffler said the December contract could climb to the US$3.50 to US$3.75 range, although he doesn't see the potential for the market to move beyond that.

 

While some in the trade say there is a strong correlation between cool weather and strong yields, Leffler said he's spoken with some farmers in different parts of the country who are "complaining because we haven't had enough heat units."

 

Funds sold an estimated 9,000 contracts Thursday. Traders noted that in early trade Thursday in the options pit J.P. Morgan bought 6,000 September puts with a US$3.20 strike price and sold 3,000 December calls with a US$3.50 strike.

 

Karlin said it's possible that speculative funds could move to a net short position, as seasonal trends point to continued pressure on the market.

 

CBOT oats futures ended lower Thursday. September oats ended down 3 cents to US$2.14 1/2 per bushel and December oats ended down 3 cents to US$2.26.

 

Ethanol futures ended higher. August ethanol ended up US$0.009 to US$1.510 per gallon and September ethanol ended up US$0.005 to US$1.480.