December 30, 2008
CBOT Corn Review on Monday: Losses pinned on year-end profit-taking
Profits from a three-week rally in Chicago Board of Trade corn futures proved too tempting to leave on the table Monday, as a sell-off spree led to double-digit losses.
Soybeans and wheat also responded to year-end, profit-taking pressure.
March corn dropped 18 3/4 cents to settle at US$3.93 1/2 a bushel, well off the day's high of US$4.21. May corn lost 18 1/2 cents a bushel to close at US$4.04 and July corn shed 18 1/4 cents to US$4.14 1/4.
Speculative funds sold an estimated 3,000 corn contracts.
"This market was set up for profit-taking," a CBOT floor trader said. "Crude oil at US$40 had some people asking how corn can maintain US$4-plus."
A high stochastic cross portends a downside correction to the US$3.65-US$3.70 range, the trader added, noting he sees "decent cash movement" and South American dryness issues as generally priced into the market.
With corn prices rallying for about three weeks, "sometime between now and the year end, longs fat with profits were going to pull some out," said Tim Hannagan, a senior market analyst at Alaron Trading.
Hannagan anticipates choppy, two-sided trade through Wednesday, with renewed buying when post-New Year trading opens Friday, he said.
The only way for corn prices to surge is if weather reports erase any hope of rain aiding crops in southern Brazil, he added.
"Over the last 24 hours, heavy thunderstorms aided Mato Grosso through Goias, while most other areas were dry with heat in Paraguay and South Brazil," said meteorologist Mike Tannura of T-Storm Weather. "As cooler air shifts further north and energy slides eastward, the threat for thunderstorms will increase from northern Paraguay through South Brazil."
"This is the most substantive rain chance for this area since early November and should provide some relief - especially [around] the key corn and soybean state of Parana," Tannura said. "That being said, this system should continue to be monitored because it is more than three days [away] and potentially critical to prevent [or] limit corn and soybean yield losses since dry weather quickly follows."
In other markets, CBOT March oat futures closed 14 cents lower at US$2.17 a bushel.
Ethanol futures also saw losses, with the nearby January ethanol contract closing US$0.051 cents lower at US$1.611 per gallon. March ethanol dropped US$0.062 cents to US$1.618.