November 13, 2008
CBOT Corn Review on Wednesday: Dips; choppy trade, outside pressure
Relentless pressure from outside markets pressured Chicago Board of Trade corn futures lower in volatile trading Wednesday.
December corn ended down 4 3/4 cents to US$3.69 1/2 per bushel, March corn ended down 5 1/2 cents to US$3.86 1/4 and May corn ended down 5 3/4 cents to US$3.98.
The corn market is trying to find "its footing" and divorce itself from other markets, but outside pressure continued to prevail, analysts said. A sharp drop in U.S. stocks, along with lower crude oil and a stronger dollar, weighed on the market.
A sudden sharp rally during mid-day trading sent the market several cents higher, but the bounce was short-lived. Traders said the market followed wheat in the rally, which was then fueled by short-covering in oversold conditions.
After breaking below October's low on Tuesday, the market did not test this week's new low Wednesday.
"This is fairly similar to how corn made the swing low a couple weeks ago," said John Kleist, broker/analyst for Allendale. We made the swing low, and then we chopped around for two weeks."
He said after continued recent losses for corn, it would be "a pretty good move just to go sideways for a while."
Rains in the U.S. Midwest and continued delays to the harvest this week provided underlying support, traders said, as concerns grow about corn being left out in the field too long and eventually lost.
Export demand remains weak, analysts said, and analysts noted that China was ending an export tax in December, which could add to world supplies.
Weak demand is exacerbated by end-users' willingness to purchase hand-to-mouth rather than buying far in advance, analysts said.
"The biggest thing is you've got a whole lot of people sitting on their hands and saying 'well, how low can this go,"' said Dale Durchholz, analyst for AgriVisor.
He said traders are paying too much attention to movement in outside markets, such as crude and equities.
"I think this mindset of just purely watching what's going on elsewhere is dangerous," he said.
Once prices rebound, they could climb very quickly due to pent-up demand, he said.
Chicago Board of Trade oats futures ended lower. December oats were down 6 cents to US$2.30 per bushel and March oats were down 5 1/2 cents to US$2.40.
Ethanol futures ended lower. December ethanol was down US$0.050 to US$1.622 per gallon and January ethanol was down US$0.044 to US$1.626.