August 2, 2008

 

CBOT Corn Review on Friday: Drops sharply on weather, liquidation

 

 

Chicago Board of Trade corn futures settled sharply lower on continuing fund liquidation and a "non-threatening" weather outlook, traders and analysts said.

 

September corn closed down 22 1/2 cents to US$5.65 per bushel, December corn closed down 22 1/2 cents to US$5.85, and March corn closed down 22 1/2 cents to US$6.05.

 

Fund liquidation, which drove prices substantially lower in late trading Thursday, continued to pressure prices for the duration of Friday's session.

 

There continues to be "a lot of speculators getting out of the market," said Sid Love, analyst with Kropf and Love consulting.

 

The market also continues to look beyond the above-average temperatures expected throughout the U.S. corn belt this weekend to an expected mid-week cooldown starting around Tuesday.

 

"After a couple of days we're going to turn this (heat) around and see another frontal system come, provide some moisture, and cool things off again," said Dale Durchholz, analyst for AgriViser. "And then, overall, you're sitting here looking to August going 'there is no weather problem.'"

 

The prospect of plentiful rain next week across portions of the corn belt is further pressuring the market, traders and analysts said.

 

"So, you've got this attitude that is pretty pervasive in the trade right now that we're going to have a reasonably good corn crop," said Durchholz.

 

There are "a lot of people" now projecting average yields at 152 bushels per acre or higher, he said. The U.S. Department of Agriculture is currently predicting an average yield of 148.4 bushels per acre. New yield projections will be released in a USDA Aug. 12 crop production report. That report is seen as the first concrete indication of the effects of June flooding throughout the U.S. Midwest.

 

Outside markets also inflated losses, traders and analysts said. Although the price of crude oil started off stronger earlier in the day, its downward tick later on pressured corn prices.

 

"It just pulled the plug on the grains market," said Durchholz.

 

The dollar also remained strong throughout the day, providing further pressure, traders said.

 

JP Morgan purchased 2,500 December contracts late in the trading session.