August 18, 2009

CBOT Corn Review on Monday: Ends lower on bearish outside markets

Corn futures at the Chicago Board of Trade closed down but off session lows Monday, as the new-crop December contract early on hit a fresh contract trough of US$3.11 1/2 a bushel.

December corn ended down 5 3/4 cents at US$3.22. September corn closed down 4/3/4 cents at US$3.14 1/2 a bushel.

Some late short covering and bottom-picking speculative buying interest did lift prices up from their lows, said a grain market analyst.

Bearishly postured "outside markets" that included sharply lower crude oil and U.S. stock index prices and a stronger U.S. dollar weighed on the corn futures market Monday. "Much of the losses in the grain markets are being attributed to outside influences that are resulting in widespread selling in the commodity world," said the grains analyst.

Additional pressure on corn futures came from favorable weather in the U.S. Corn Belt, as widespread rains and the lack of extreme heat over the weekend have traders looking for slight improvement in corn and soy condition ratings to be reported by USDA Monday afternoon, said the analyst.

The weather in the U.S. Corn Belt is deemed nearly ideal for late-season corn plant development, said Brian Hoops with Midwest Market Solutions. As a result, some traders feel a record national average corn yield is definitely within reach. "Unless proven otherwise, it will be difficult for the corn market to turn the trend around," the grain analyst said.

The Pro Farmer Midwest Crop Tour kicked off Monday. Crop scouts will be sampling corn and soy fields across the Corn Belt. The first official state tour numbers from Ohio and South Dakota will be issued Monday evening. The tour will likely confirm "big yields," said Midwest Marketing Solutions' Hoops.

Corn traders are currently viewing the corn: soy futures price ratio as "out of whack," said the grain analyst. A traditional ratio is for soys to be about 2.5 times the price of corn, but the current ratio is currently around 3.3:1, he said.

In the latest weekly commitments of traders report issued by the Commodity Futures Trading Commission Friday afternoon, large speculators reduced their net short corn futures positions by 5,951 contracts, to 117 394 contracts. Meantime, commercial traders of corn futures also reduced their net short futures positions - by 4,072 contracts, to 501,906 contracts. The large "index fund" traders did increase their net long positions by 2,126 contracts, to 385,137 contracts.