December 18, 2008
CBOT Corn Review on Wednesday: Slips on profit-taking, crude pressure
The rally in Chicago Board of Trade corn futures stalled Wednesday, as the market ended lower amid profit-taking and weaker crude oil, analysts said.
March corn ended down 4 1/2 cents to US$3.89 1/2 per bushel, May corn ended down 4 3/4 cents to US$4.00 1/2 and July corn ended down 5 1/4 cents to US$4.11.
Corn had gained almost US$1 since it started rallying at the start of last week, and was due to slip, traders said. Corn's drop came despite continued weakness in the dollar.
"They got a little altitude sickness, maybe," said Sid Love, analyst for Kropf and Love consulting.
After closing Tuesday above its 50-day moving average for the first time since July, March corn dipped back below it Wednesday, closing under the average of US$3.91 1/4.
Love added that the trade probably overreacted to last week's Informa estimates, which projected less corn acreage in favor of soybeans in 2009. Since that report, the corn-soybean spread has narrowed considerably, and "there was probably some profit-taking off of that," a trader said. Soybeans gained 5 cents to 6 cents.
The dollar's weakness, which helped drive corn's rally, remained weak Wednesday. But crude oil also continued to drop, to US$40 on Wednesday, and traders say there is concern about how corn's climb and crude's drop will affect ethanol producers.
A trader said that, after corn failed to climb above overnight highs in early trade, "it just seemed to run into a round of profit-taking."
Another trader added that "the US$4 mark's going to be a massive number" posing resistance. He expects corn to test levels around US$3.35 to US$3.50 in March, although he adds that the market has set its seasonal low already.
Analysts say that, despite corn's recent strength, open interest has continued to lag, and demand remains weak. The USDA is expected to report weekly export sales between 450,000 and 800,000 metric tonnes, down from 1.058 million the previous week.
CBOT oats futures ended lower. March oats were down 4 cents to US$2.22 per bushel and May oats were down 4 cents to US$2.31.
Ethanol futures ended slightly higher. January ethanol ended up US$0.005 to US$1.592 per gallon and March ethanol ended up US$0.015 to US$1.615.