November 26, 2009

 

CBOT Corn Review on Wednesday: Up on weak dollar; technical strength

 

 

Chicago Board of Trade corn futures surged Wednesday, ending higher on a weaker dollar and unwinding of the corn-soy spread, analysts said.

 

December corn ended up 16 cents at US$3.92 a bushel, and March corn ended up 16 cents at US$4.08.

 

With little fundamental news and light preholiday trade, corn took its cue from outside markets. A weak dollar and strong gains in other markets, such as gold, pointed the way higher, and corn was strong all day.

 

The market, which ended a streak of six straight sessions in which prices dropped, continued to surge even as soy retreated in morning trade.

 

"It seemed like yesterday the corn/soy spread got a little out of whack," said John Kleist, broker/analyst for Allendale.

 

Market bulls were saying prices fell "too much too fast" in recent days, said Chad Henderson, analyst with Prime Ag Consultants. Funds bought an estimated 10,000 contracts.

 

"These markets are on drugs," Henderson said. "Take whatever people think the market should be doing on a given day and multiply it by three."

 

Kleist said the recent weakness in the market has been due to heavy liquidation in the spot month. With first notice day approaching, the liquidation shows that "longs don't want to take delivery of sloppy, wet corn amid poor export demand," Kleist said.

 

The market reasserted its technical strength--after dipping below the 20- and 200-day moving averages Tuesday, it surged back above both averages Wednesday. Trading was light Wednesday and should remain so Friday, when the market reopens after Thursday's Thanksgiving holiday, analysts said.

 

The market's fundamentals are questionable at current price levels, analysts say, noting weak export demand. Basis, or the difference between cash and futures prices, weakened on the futures rally.

 

The presence of cheap, feed-quality wheat is displacing corn and could continue to limit corn demand, analysts said. But some traders said farmers remain reluctant to sell, as they are expecting prices to climb further.

 

A sluggish harvest, which has been further stalled by wet U.S. corn belt weather this week, has been underpinning the market.

 

CBOT oats futures ended up slightly. December oats ended up 1/2 cent at US$2.58 a bushel, and March oats settled up 1/2 cent at US$2.71 1/2.

 

Ethanol futures ended higher. December ethanol ended up US$0.029 at US$2.108 a gallon, and January ethanol ended up US$0.041 at US$1.992.