December 27, 2008
CBOT Corn Review on Friday: Rally extends above US$4 on light volume
Chicago Board of Trade corn futures closed above US$4 Friday in a light-volume, short-covering trade driven by soybean strength and global weather concerns, analysts and traders said.
The most-active March corn gained 14 1/4 cents to settle at US$4.12 1/4 a bushel, just under the day's US$4.14 1/2 high.
Speculative funds bought an estimated 3,000 corn contracts, according to midday estimates.
While grains seem to be divorced from lockstep outside market influence, corn's rally is susceptible to a break in soybean prices, a CBOT floor trader said.
"There's a little bit of cash selling, but I don't put much emphasis on price when it's such a light-volume trade," the trader added. "If soybeans break, corn will also."
While the rally may continue, analysts expect at least one day of price slippage before the year's end.
"There's a day coming where there will be some profit-taking," said Tim Hannagan, an Alaron senior market analyst.
Friday's move represents continuation of the "key reversal" rally that sprouted after corn hit its year low of US$3.09 1/4 on Dec. 5, he said, adding that US$4.16 and, to an even greater degree, US$4.50 stand as more formidable rally blocks.
The market is also responding to concerns over crop-harming South American dryness, Hannagan said. He added that a weekly close above US$4 will have significant influence over the trading decisions of technically oriented trend-following funds.
"A close above the US$4 resistance could lead to another 20-30 cent move," said the Linn Group's Terry Linn. "Near-term [technical indicators] remains friendly, and with South American dryness issues, and acreage/production question marks surrounding new crop, don't be short this market."
In other markets, CBOT March oat futures closed 12 1/4 cents higher at US$2.31 a bushel.
Ethanol futures also saw gains with the nearby January ethanol contract closing US$0.049 cents higher at US$1.662 per gallon. March ethanol closed US$0.045 cents higher at US$1.68.