July 23, 2009

 

CBOT Corn Review on Wednesday: Sets new lows on weather, technical pressure

 

 

Chicago Board of Trade corn futures ended lower Wednesday, setting new lows on the break before trimming losses later in the day.

 

September corn ended down 3 1/2 cents to US$3.08 per bushel and December corn ended down 2 3/4 cents to US$3.19 1/4.

 

Benign weather has remained the market's dominant theme, as cool weather and ample rainfall keep pointing to a strong crop and comfortable ending stocks.

 

In addition to the weather, the market remains under pressure technically, as short-covering rallies are short-lived and bulls are unable to find any news to hang their hats on.

 

"You've got a negative psychology, and there are not many things that overtly bullish," said John Kleist, broker/analyst for Allendale. "And 'oversold' is not necessarily ever a reason to be bullish."

 

Analysts added that continued weakness in the wheat market is pressuring corn. Kleist said that the possibility the government will decline to increase the ethanol blend from 10% this year is another psychologically bearish factor.

 

September corn dropped below the December 2008 bear market low of US$3.06 in early trade, to US$3.04 1/2, the lowest front-month price since 2006.

 

But a floor trader noted that the new low held throughout the day.

 

"You didn't really retest it, either," he said.

 

The trader expects that support to prompt some short-covering and expects the U.S. Department of Agriculture will report strong weekly export sales Thursday morning.

 

Still, the "farmer still holds way too much grain," which will limit any rebound, he said.

 

The market is eyeing the psychologically important US$3 threshold. Many are more concerned about the December contract, which has more volume and open interest, but Kleist said a dip below US$3 in the September contract would also be bearish.

 

Traders are also eyeing the potential for an early first frost, which would be damaging to a crop that looks good but is behind schedule. Drew Lerner, meteorologist and owner of World Weather Inc., said that "evidence that points toward favoring continued cool weather going into the autumn, and that may raise the risk of frost and freezes."

 

The cool weather is keeping crop development slow, Lerner and others added, which makes it more likely that growth won't be complete before frost arrives.

 

CBOT oats futures fell for the second straight day. September oats ended down 7 1/2 cents to US$1.99 per bushel and December oats ended down 7 1/4 cents to US$2.11. The September contract has lost 17 cents the past two days.

 

Ethanol futures were lower. August ethanol ended down US$0.006 to US$1.532 per gallon and September ethanol ended down US$0.014 to US$1.491.