July 26, 2008

 

CBOT Corn Review on Friday: Closes higher on end-users, technical support

 

 

End-user buying and technical support pushed Chicago Board of Trade Corn Futures to a higher close Friday.

 

September corn closed up 4 1/4 cents at US$5.77 1/4 a bushel, December corn closed up 4 1/2 cents at US$5.96 1/2, and March closed up 4 3/4 cents to US$6.16.

 

After a precipitous four-week decline, some analysts said corn was due for a technical bounce. Oversold conditions led to some speculative short-covering, a trader said.

 

Some analysts and traders said they doubted the gains were a sign of a sustained rally, given a lack of fresh fundamentals.

 

"Even on short-covering rallies, it has been difficult to hold the gains, suggesting that the longer term still is lower over the next few weeks or so," said Joel Karlin, manager and commodity sales coordinator at Western Milling.

 

Although short-term weather forecasts remain bearish, the potential for excessive heat in the long range forecast prompted traders to put a modest weather premium back into the market, analysts said.

 

The heat could arrive in the first week of August, although this would be "fairly late" to affect a crop that will be 90% pollinated at that point, according to Cropcast Agricultural Weather.

 

Analysts said traders are finally starting to perceive stabilization in the market, which has led to end-user buying.

 

Friday was the second straight day that corn closed higher. Kent Beadle, a market analyst with Country Hedging, said that a market that was rationing demand just two weeks ago is now seeing increased demand from various sectors.

 

"This break has put a lot of profitability back into sectors that use the corn," Beadle said. "The ethanol plants that had previously shut down due to the expense of corn have come back on line, and we're seeing some profitability move back into the hog sector."

 

This all implies that a sustained rally could occur, pushing December prices into the US$6.50-US$6.75 range, he said. CBOT oats futures ended lower. Although the oats market didn't bounce like other markets, a trader said that was mostly due to some selling very late in the session. "I don't think we're as weak as we closed," he said. September oats were down 6 cents at US$3.84, December oats were down 6 cents at US$4.01 1/2 and March oats were down 6 cents at US$4.20 1/2.

 

Ethanol futures ended higher. September ethanol was up US$0.090 at US$2.385 a gallon and December ethanol was up US$0.085 at US$2.393.