July 1, 2009

 

CBOT Corn Review on Tuesday: Tumbles on USDA acreage increase

 

 

Chicago Board of Trade corn futures dropped by their exchange-imposed daily trading limit Tuesday after a bearish U.S. Department of Agriculture acreage report shocked the market.

 

July corn ended down 29 1/4 cents at US$3.47 3/4 a bushel. September corn ended down 30 cents, the daily limit, at US$3.54 1/2. December corn also ended limit down 30 cents, to US$3.67 1/4 a bushel.

 

The USDA projected 2009 seeded acres at 87.035 million, a significant increase from the March estimate of 84.986 million acres. The projection was much higher than the trade's expectations, with the highest analyst estimate surveyed by Dow Jones at 86 million acres.

 

Traders and analysts said the day was characterized by "get-me-out-of-here" selling.

 

A floor trader said remaining length in corn futures was liquidated Tuesday. Funds sold an estimated 8,000 contracts. December corn synthetically traded at about US$3.60 to US$3.66 1/2, traders said, a sign of further potential downside on Wednesday. Shawn McCambridge, senior grains analyst at Prudential Bache, said he expects follow-through selling. The trading limit Wednesday will be expanded to 45 cents, according to the CME Web site.

 

Corn tumbled at the open and remained mostly limit down throughout the day. July dipped to US$3.40 before trimming losses slightly. A trader said soys could have lent some support to the market, pulling July off its low last seen in early December. Jerry Gidel, grain analyst with North American Risk Management Services, said he thinks acreage could still undergo revisions, which happened last year. If they do not, "such a surprisingly large increase is sufficiently large to meaningfully recast the longer-term outlook for corn prices," JPMorgan analyst Lewis Hagedorn said in a commentary.

 

Gidel said crop conditions are unusually good for the time of year, which is bearish for the market. The USDA said Monday that 72% of U.S. corn was in good to excellent shape as of Sunday, up two percentage points from last week.

 

Traders and analysts said a separate report on grain stocks was also bearish. The USDA report revealed that corn stocks totaled 4.266 billion bushels as of June 1, higher than the average analyst estimate of 4.190 billion and up from the total of 4.028 billion at the same time last year.

 

Tuesday's reports show that corn supplies should be "comfortable" in the 2009-10 marketing year, analysts said.

 

Corn prices are further plagued by favorable weather, heightening the bearish environment. Weather is expected to remain benign for the crop.

 

Major chart damage has been inflicted on the corn futures market recently, heading into the key trading month of July, technical analyst Jim Wyckoff said. History shows that the trading days following the U.S. Independence Day holiday can find price trends in the grain futures markets either accelerating or reversing, he said.

 

CBOT oats ended higher. July ended up 1 1/4 cents at US$2.14 3/4 per bushel, and September ended up 2 cents at US$2.25.

 

Ethanol ended lower. July ended down US$0.058 at US$1.635 gallons, and September ended down US$0.096 at US$1.550.