July 8, 2008


CBOT Corn Review on Monday: Limit down on favorable crop weather



Improved weather forecasts, coupled with pressure from outside markets, pushed Chicago Board of Trade corn futures sharply lower Monday.


July corn, which traded without limits because it is in delivery, closed down 29 1/2 cents to US$7.16 1/2. September corn closed down 30 cents, the exchange-imposed daily limit, to US$7.27 3/4, and December corn closed down 30 cents to US$7.47.


Prices slumped as traders returned from the long Independence Day holiday weekend to find weather forecasts were much better than originally feared last week. After a wet spring and historic flooding in parts of the U.S. corn belt in June, prospects for the crop are not quite as dire, analysts said.


"I think a lot of people had a chance to get into the countryside, look and say 'oh, we do have some corn and beans out there,'" said Jack Scoville, Vice President for Price Futures Group.


Monday's losses helped reverse gains from last week, which were caused by "knuckleheads who thought there would be a drought this week," said John Kleist, broker/analyst with Allendale in McHenry, Ill.


A trader said September corn was trading synthetically around US$7.07, and December corn was trading around US$7.25.


Weather forecasts are calling for periodic rain showers and warm but not excessively hot temperatures, which should benefit the crop in most places, analysts said.


The market also was pressured by outside markets, particularly lower crude oil prices and a stronger dollar.


Traders are "defensive" because of possible government intervention into the commodities markets. Although analysts say the first target could be crude oil, any action would be seen as bearish for corn as well.


"If crude is afraid of it, corn should be afraid of it," Kleist said.


Private analytical firm Informa Economics Monday estimated that the 2008-09 U.S. corn crop will total 12.002 billion bushels, with a yield of 152 bushels an acre.


The U.S. Department of Agriculture last month pegged corn production at 11.735 billion bushels. The national average yield was projected at 148.9 bushels an acre.


The Informa report was bearish, traders said, but likely had little effect on the market, as prices were already limit down when the report was released.


The market will remain very sensitive to weather forecasts for weeks to come, analysts said. A trader said that while he's sure there will be some more "hot-and-dry weather scares" this summer, "you could have seen the highs for the year."


The daily trading limit will be expanded Tuesday to 45 cents.


CBOT oats futures dropped by their daily limit. July oats, which are trading without limits, closed down 20 cents to US$4.35 per bushel, September oats closed down 20 cents to US$4.47 3/4 and December oats ended down 20 cents to US$4.66. A trader said trading was light and the market followed corn lower.


Ethanol futures were lower. September ethanol closed down US$0.069 to US$2.80 per gallon and December ethanol closed down US$0.088 to US$2.792.


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