August 6, 2009

 

CBOT Corn Review on Wednesday: Slips following bearish crop projection

 

 

Chicago Board of Trade corn futures ended lower Wednesday, sliding on a private firm's bearish crop projection, analysts said.

 

September corn ended down 7 1/2 cents at US$3.47 and November corn ended down 8 3/4 cents at US$3.57.

 

The projection from private analytical firm Informa Economics that this year's crop would total 12.991 billion bushels, with a record yield of 164 bushels per acre, prompted the drop in morning trade. The market's initial slide was accelerated by technical selling, a trader said.

 

The projections confused the trade as it digested Informa's report. The report, released around 10:30 a.m. EDT, included a more neutral estimate from Informa of what it expects the USDA to project in its Aug. 12 crop production report. The neutral projection filtered through the trade first, before traders caught wind of Informa's own projection and started selling.

 

"Whenever the market gets surprised, you'll start to get action like that," said Jim Riley, analyst for Linn Group. "A lot of people probably walked away from their desks or walked off the floor at 10:35."

 

Still, Riley said "it was nice to see it trade down to the US$3.50 level (in the December contract), and then bounce off of there. Now you have to see if that level is going to hold."

 

Views of the weather are mixed, but most see oncoming heat in the U.S. Midwest as bearish because it should be accompanied by rain.

 

John Kleist, broker/analyst for Allendale, adds that the threat from hot weather entering the U.S. corn belt has been overblown.

 

"A lot of areas are going to have record yields," Kleist said. "The weather looks good."

 

Kleist added that Tuesday's rally came amid a drop in open interest of 10,000 contracts, which refutes the notion that index funds are re-entering the market.

 

Funds sold an estimated 11,000 contracts Wednesday.

 

Riley said the corn market doesn't have a compelling story at the moment, unlike soys. He said corn's direction could depend on weather and weather forecasts over the next few days.

 

CBOT oats futures ended lower. September oats ended down 1 cent at US$2.10 per bushel and December ethanol ended down 1 cent at US$2.24.

 

Ethanol futures were lower. August ethanol ended down US$0.023 at US$1.635 per gallon and September ethanol ended down US$0.019 at US$1.617.