January 28, 2009

 

CBOT Corn Review on Tuesday: Falls sharply on Argentina, poor demand

 

 

Rainfall in Argentina and weaker soybeans sent CBOT corn futures lower Tuesday, traders said, as the market dipped and closed below its 10- and 50-day moving averages.

 

March corn ended down 16 1/4 cents to US$3.77 1/2 per bushel, May corn ended down 16 1/4 cents to US$3.88 1/2, and July corn ended down 16 cents to US$3.99 1/4.

 

Traders said the market ran out of support from weather in Argentina, where an intensifying drought has raised concerns about the crop. Rains and forecasts calling for more rains weighed on Tuesday. One trader noted that some forecasters are suggesting the longer-range weather pattern in the country might be changing.

 

The rain is also bearish for soybeans, which have been leading corn and also fell sharply Tuesday. A trader said speculative selling was a feature of the market.

 

"Volume did go up on the break, which tells me that recent longs probably blew out," a trader said. He added that volume had dropped the previous five days.

 

A drop in crude oil of more than US$4 and a gloomy demand outlook added pressure, traders said. Funds sold an estimated 6,000 to 7,000 contracts.

 

The drop below the US$3.80-US$3.81 range put the market below all of its major moving averages and was a bearish sign technically, said Mike Zuzolo, senior analyst for Risk Management Commodities.

 

Some analysts have said that the market, which has traded a relatively narrow range in recent days, was potentially poised for a significant break out of the range in one direction or another.

 

Zuzolo said the bearish macroeconomic environment is weighing on corn and other commodities. A slew of job cut announcements this week has added to the gloom, he said.

 

"I do think these job cuts we've seen announced the past couple days really are a true surprise to the market, and it's going to be really difficult to stimulate any talk of improving demand at all," Zuzolo said.

 

CBOT oats futures were lower. March oats ended down 3 cents to US$2.12 per bushel and May oats ended down 3 cents to US$2.21 1/2.

 

Ethanol futures ended lower. February ethanol ended down US$0.037 to US$1.573 per gallon and March ethanol ended down US$0.041 to US$1.580.