July 23, 2008


CBOT Corn Review on Tuesday: Falls on weather, crude, EPA delay



Falling crude-oil prices and continued favorable crop weather pushed Chicago Board of Trade corn futures lower Tuesday.


September corn ended down 15 3/4 cents to US$5.73 1/2, December corn was down 16 cents to US$5.92 1/4 and March was down 16 1/2 cents to US$6.11 1/4.


Analysts said the break in crude oil halted any ideas that the market would have a technical bounce Tuesday. Crude settled down US$3.09 as fears of hurricane damage to U.S. Gulf Coast infrastructure eased.


"The corn has really followed the crude oil very closely," said Joel Karlin, manager and commodity sales coordinator at Western Milling. He added that "every day the weather is favorable, the crop is getting bigger."


"The crop is in very good condition, albeit late," Karlin said.


Weather remains a bearish influence, traders and analysts said, as temperatures remain moderate amid periodic rainfall. Analysts said that if corn makes it through pollination in the next couple of weeks without excessive dryness, the crop won't face a significant weather threat until the early fall.


Corn has had "horrible technical performance" recently, a trader said. December corn broke below US$6 Tuesday, and its intraday low of US$5.90 is its lowest price since April 1.


The December contract peaked at US$7.99 1/4 on June 27.


Although many say the market is oversold, others say prices remain historically high and could continue to drop if crude falls and weather remains bearish.


An analyst said the Environmental Protection Agency's announcement Tuesday that it would delay a decision on Texas' request for a waiver from the federal Renewable Fuels Mandate was also bearish.


The EPA administrator said Tuesday he needed more time to announce whether he will roll back the law mandating a five-fold increase in annual ethanol production to 36 billion gallons. Texas Gov. Rick Perry, who has sought the waiver, said the mandate is contributing to high corn prices that are hurting the state's beef, chicken and dairy industries through higher feed costs.


The trade has expected the EPA would rule against Texas, said Vic Lespinasse, an analyst with grainanalyst.com. Approval of the waiver request would be seen as an indication the government was ready to curb ethanol usage, analysts said.


CBOT oats ended slightly higher. Prices rebounded on late fund buying, a trader said. He added that "the only defensive thing in the whole market was corn." September oats were up one cent to US$3.87 per bushel, December oats were up 1 cent to US$4.05 and March oats were up 1 cent to US$4.24.


Ethanol futures were lower. September ethanol was down US$0.093 to US$2.254 per gallon and December ethanol was down US$0.086 to US$2.244.


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