October 21, 2010

CBOT corn soars on broad-based commodity bounce

US corn futures ended sharply higher Wednesday, settling near the market exchange's imposed upper daily trading limits in a recovery from prior losses on broader bounce in commodities.

CBOT December corn ended US$0.27 one-half, or 5% higher, at US$5.73 one-half a bushel. Speculative fund buying was estimated at 20,000 lots.

"After declining for five consecutive trading days and outside markets keeping sellers out of the market place, a weaker dollar helped prompt a rally across commodities," said Terry Reilly, grains analyst with Citigroup Global Markets Inc.

A weaker dollar makes US commodities cheaper for foreign buyers, helping prompt a rally in grains.

Commercial and speculative buying on price breaks managed to overturn the downward momentum of the past five trading days, as the uncertainty of 2010 production and the threat of further tightening of US supplies in the USDA's November crop report provided underlying support.

Corn futures were able to retrace most of the losses incurred during a more than 5% pull back in prices the past week after surging to two-year highs. The market erased Tuesday's knee-jerk reaction to an increase in China's lending rate, which raised concerns about the potential for reduced consumption of raw materials, and to a subsequent rally in the US dollar. China has emerged as a significant buyer of US corn this year, and traders speculate the increased lending rate will not stop China from buying the grain it needs.

The market was buoyed by strong buying beneath the market, with advances accelerating once active contracts pushed above prior session highs, analysts said.

Traders will eye Thursday's weekly export sales report for demand clues, with industry participants worried that current high prices may be curbing export demand amid a lack of daily sales announcements from the USDA.

The USDA is scheduled to release its weekly export sales report on Thursday (Oct 21). Weekly US corn export sales are expected to be 650,000 to 950,000 tonnes.