July 12, 2008


CBOT Corn Review on Friday: Stops slide on weather uncertainty



The potential for troublesome crop weather and outside market support boosted Chicago Board of Trade corn Friday, as the market ended a week-long slide to close higher.


July corn ended up 4 3/4 cents to US$6.80 per bushel, September corn closed up 4 1/2 cents to US$6.91 and December ended up 5 cents to US$7.09 1/4.


Although weather for the next several days will remain favorable to crop development, talk of potential hot, dry weather the week after next was enough to help prompt a rebound in afternoon trading, traders said.


"It just shows you how hypersensitive the market is to weather," said Vic Lespinasse, analyst for grainanalyst.com.


Traders cited a couple of different weather forecasts that introduced the possibility of hot, dry weather. But one of those meteorologists, Drew Lerner with World Weather Inc., said the dry weather would be more of an issue in the southern plains and the U.S. Delta than it would in the corn belt. He said heat wouldn't be a factor, and that most of the corn belt could withstand a couple weeks without rain.


"I think it's going to be really tough to make an issue for the corn crop," Lerner said.


Outside markets also provided support, traders said, particularly crude oil. A trader added that the market had broken pretty hard all week and was due for a rebound.


Prices rebounded after dropping below US$7 in the December contract, which was considered a key psychological barrier. A trader said the higher close could provide momentum headed into next week, but that "I still think Sunday night trading will be about the latest weather forecast."


Views on the U.S. Department of Agriculture's supply and demand report released Friday morning were mixed.


Analysts were surprised by the USDA's reduced yield projection, to 148.4 bushels per acre from 148.9. Some had expected no change, while others had forecast an increase in light of the favorable weather that has settled over the U.S. corn belt following June's flooding.


Others thought larger-than-expected ending stocks for both old crop and new crop were bearish. Lespinasse said he considered the report somewhat bearish but that ultimately it didn't matter.


"August 12 is the report that matters," Lespinasse said, referring to a USDA report that will better reflect the impact of the flooding.


CBOT oats were mostly flat. July oats, which are in delivery, closed down 3 1/2 cents to US$4.37 per bushel while September oats ended flat at US$4.49 1/2 and December oats ended flat at US$4.67 1/2.


Ethanol futures were higher. September ethanol ended up US$0.023 to US$2.723 per gallon and December ethanol ended up US$0.010 to US$2.731.


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