July 19, 2008

 

CBOT Corn Review on Friday: Lower on weather, technical weakness

 

 

Good crop weather extended the slide for Chicago Board of Trade corn Friday, as prices continued to plunge below technical support points.

 

September corn ended down 21 3/4 cents to US$6.09 1/2 per bushel, December corn ended down 21 1/2 cents to US$6.28 1/2 and March corn ended down 21 cents to US$6.47 3/4.

 

The December contract fell and closed below the 100-day moving average for the first time since October. Prices have fallen from a contract record of US$7.99 1/4 on June 27 and from a July 3 close at US$7.77.

 

U.S. corn belt weather remains bearish, with periodic rainfall and a lack of excessive heat. Traders have studied the long-range forecast closely recently for any signs of hot, dry weather that could damage the crop.

 

"We're in the midst of the critical pollination period," said Joel Karlin, analyst for Western Milling in Goshen, Calif. "This is really the make-or-break time for corn."

 

If corn makes it through the next couple of weeks without excessive drying, the crop will be considered mostly "in the clear," at least until the potential for an early frost emerges as a threat, analysts said. Traders and analysts say that yields, which some had projected as low as 145 bushels per acre during last month's flooding, are seen around 150 bushels or higher.

 

Corn has been swept up in widespread commodity liquidation, analysts said. Some traders and analysts say that prices could drop even further if index funds, which largely hold long positions, join in the selling.

 

In addition to fundamental bearishness from the weather, analysts say the drop is seasonal. The trade is awaiting crop production and supply and demand reports from the U.S. Department of Agriculture on Aug. 12.

 

"It's nothing unusual for the market to continue to drop heading right into the August crop production report, and often we'll crater right around then," Karlin said.

 

At some point, analysts said, good weather will no longer cause lower prices.

 

"I don't have any idea when that will be," said Vic Lespinasse, analyst with grainanalyst.com. "But we always overdo it."

 

Although this week's plunge in crude oil pressured corn, corn dropped Friday despite crude-oil gains.

 

CBOT oats futures ended lower, and broke below 100-day moving averages on the same day as corn, a trader said. September oats were down 14 3/4 cents to US$4.00 1/4 per bushel, December oats ended down 14 3/4 cents to US$4.16 3/4 and March oats ended down 14 1/4 cents to US$4.35 3/4. The trader said that whether the break below the 100-day moving average prompts more selling next week "depends on what corn does."

 

Ethanol futures were sharply lower. September ethanol ended down US$0.103 to US$2.399 per gallon and December ethanol ended down US$0.190 to US$2.310.