July 18, 2008

 

CBOT Corn Review on Wednesday: Down sharply on outside pressure, weather

 

 

Widespread liquidation in commodities drove Chicago Board of Trade corn futures sharply lower Thursday, and the market continued to feel pressure from an improving crop outlook.

 

September corn ended down 27 1/4 cents at US$6.31 1/4 per bushel, December corn ended down 27 1/4 cents at US$6.50, and March corn ended 26 3/4 lower at US$6.68 3/4.

 

Prices plunged on pressure from outside markets, including crude oil, which has posted its biggest three-day dollar loss ever, and soybeans, traders said. Prices for September and December closed at their lowest levels since June 5 - the first day of a sharp record-breaking climb on historic flooding.

 

An improved crop outlook has pressured prices all month, and analysts said there were few threats on the horizon.

 

"The weather still looks pretty good," said Jack Scoville, vice president at Price Futures Group. "I know they're trying to talk about big heat coming late next week, but I don't really see there's much of an issue there."

 

He added that corn prices typically fall this time of year, and that they could continue to "suffer" at least until Labor Day, barring an extreme weather pattern.

 

Forecasters have said some weather models include the possibility of a hot, dry weather pattern in the long-range forecast. The possibility helped corn rally Wednesday.

 

"However, while possible, the probability of an intense heat wave with dryness is somewhat unlikely because of current soil moisture, recent wetness, and longer-term history," Mike Tannura, meteorologist with T-storm Weather, said Thursday.

 

Analysts add that if corn makes it through pollination the next couple of weeks without extreme dryness, the crop will be mostly "in the clear" until early fall, when early frosts will pose a new weather threat.

 

Corns followed soybeans, traders said. Soybeans plunged in part on the Argentine Senate's rejection of export taxes early Thursday morning. The move was good news for the country's farmers, who are now considered less likely to strike.

 

A trader said with crude oil "acting kind of toppy" in recent days, liquidation could continue. The market could drop further, he said, if index funds, which overwhelmingly hold long positions, join in the liquidation.

 

After not closing below the 50-day moving average since March, corn has ended below that average every day this week.

 

CBOT oats ended lower. September oats closed down 13 cents at US$4.15 per bushel, December oats were down 14 cents at US$4.31 1/2, and March oats were down 13 1/2 cents at US$4.50. A trader said the market followed corn.

 

Ethanol futures were sharply lower. September ethanol ended down US$0.117 at US$2.502 per gallon and December ethanol closed down US$0.110.

 

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