August 11, 2009

 

CBOT Corn Review on Monday: Higher amid short-covering, spread trade

 

 

Chicago Board of Trade corn futures ended higher Monday amid short-covering as traders bought corn and sold soys, analysts said.

 

September corn ended up 2 1/4 cents at US$3.24 1/4 a bushel, and December corn ended up 4 cents at US$3.33.

 

Traders said there was no fundamental driver behind the day's gains, but that at more than 3-to-1, the soy-to-corn price ratio has gotten out of whack and is in need of a correction. November soys ended down 28 1/2 cents at US$10.10 per bushel.

 

At some point, the spread will contract further, although that may not happen right away, traders said.

 

The market unexpectedly opened higher and remained firm throughout the session despite weather that is mostly considered bearish and an optimistic crop outlook.

 

"I think it's tough to rationalize today's trade," said Chad Henderson, an analyst with Prime Ag Consultants.

 

Henderson and others said the market was oversold after last week's plunge. Analysts also noted positioning ahead of Wednesday's crop production and supply-and-demand reports from the U.S. Department of Agriculture.

 

The market could move sideways into the report, with prices between US$3.20 and US$3.40 in the December contract, Henderson said.

 

Funds bought an estimated 5,000 contracts.

 

The USDA will issue its crop production and ending stocks forecasts Wednesday at 8:30 a.m. EDT. The trade is expecting the USDA to hike its production and carryout estimates, as the summer's favorable weather fuels expectations of a strong crop.

 

Hot weather in the first half of August in the corn belt is mostly expected to have a beneficial effect on the crop, which is behind schedule. Rainfall is mitigating any crop damage, analysts said.

 

However, the trade is still expecting a drop of 1 to 2 percentage points in the portion of the crop rated good-to-excellent in Monday afternoon's USDA crop progress report.

 

CBOT oats futures ended lower. September oats ended down 4 1/2 cents at US$1.94 3/4 per bushel, and December oats ended down 3 cents at US$2.08.

 

Ethanol futures were mixed. September ethanol settled down US$0.007 at US$1.533 per gallon, and November ethanol ended up US$0.007 at US$1.491.