July 22, 2009

 

CBOT Corn Review on Tuesday: Lower as market drops on cool weather

 

 

Chicago Board of Trade corn futures ended lower Tuesday on bearish weather and technical selling after the market reached new lows, traders said.

 

September corn ended down 11 3/4 cents to US$3.11 1/2 per bushel and December corn ended down 11 3/4 cents to US$3.22.

 

Bearish weather continues to be the market's dominant force, traders said. There is nothing but cool weather for the foreseeable future, and meteorologists say there is a strong correlation between cool weather and strong yields, analysts said. They add that rainfall remains adequate, with most of the Midwest expected to see rainfall this week.

 

Traders said that a Monday report from University of Illinois agricultural economist Darrel Good highlighted the strong crop expectations that are spreading. Good said current models, assuming there is no early frost, put this year's corn yield at 161.9 bushels per acre, well above the record of 160.4 bushels.

 

Both the September and December contracts dipped to new lows on Tuesday's break, with the December contract reaching US$3.20 1/2. The new lows triggered sell stops, traders said.

 

Corn is currently a follower of neighboring markets, analysts say, and both wheat and soys were lower Tuesday. The market is under seasonal pressure, traders added.

 

"If you really want to get bearish, you could go to US$2.98 (in December)," a trader said. December could also have support at US$3.05, he added.

 

But the trader, along with some analysts who have been bearish corn for several weeks, said the market seems to be "overdoing it" to the downside.

 

Some traders and analysts say that the market has prematurely removed all the risk premium from the market. They note that an early frost could still cause significant damage to a crop that looks good but is behind schedule.

 

Other analysts acknowledge the frost threat but say that it's much too soon for the trade to worry about it.

 

CBOT oats futures fell Tuesday. September oats ended down 9 3/4 cents to US$2.06 1/4 per bushel and December oats ended down 9 3/4 cents to US$2.18 1/4.

 

Ethanol futures were lower. August ethanol ended down US$0.022 to US$1.538 per gallon and September ethanol ended down US$0.029 to US$1.505.