August 14, 2009

 

CBOT Corn Review on Thursday: Ends lower as crop fundamentals weigh

 

 

Bearish crop fundamentals weighed on Chicago Board of Trade corn futures Thursday, as a short-covering rally ran out of steam and the market ended lower.

 

September corn was down 6 1/4 cents to US$3.24 1/2 per bushel, and December corn was down 4 1/4 cents to US$3.32.

 

The market initially extended Wednesday's rally, which came despite what most saw as a bearish government crop production report. The market later retreated Thursday along with neighboring soybeans and wheat.

 

"I think people woke up and saw the big picture and said, 'There's no way I'm staying long,'" a trader said.

 

He noted that the U.S. Department of Agriculture projected a yield of 159.5 bushels per acre, less than one bushel below the record, and that it was likely to increase.

 

"Big crops always get bigger," he said.

 

The USDA report should continue to pressure the market over time, said Jason Britt, president of Central State Commodities. Farmers still have old crop supplies to sell, and analysts see little long-term upside potential unless weather starts to pose a threat.

 

"I think you're going to find willing sellers when it pokes up here," he said.

 

He said he had clients with offers to sell at US$3.50 in the December contract, but "we didn't quite make it."

 

Weather remains benign and is mostly seen as bearish by traders. Recent hot weather is dissipating, and the crop is getting enough rainfall in most areas, they said. Some traders say that if the weather remains favorable, corn will ultimately break below US$3.

 

Although Wednesday's USDA report projected a surprising increase in demand, many traders see the projections as overly optimistic, particularly a projected increase in feed demand from a struggling livestock industry.

 

Corn's losses were limited compared with the drop in soybeans. Some traders, noting the historically wide soybean-corn ratio, said soybeans are unlikely to gain on corn, and that higher soybean prices are the best chance for continued strength in corn.

 

CBOT oats futures ended up slightly. September oats settled up 1/4 cent to US$2.01 1/4 per bushel, and December oats closed up 1/2 cent to US$2.15.

 

Ethanol futures were higher. September ethanol closed up US$0.015 to US$1.565 per gallon, and November ethanol settled up US$0.004 to US$1.526.