August 6, 2008

 

CBOT Corn Review on Tuesday: Falls again as rally is short-lived

 

 

Chicago Board of Trade corn continued to slide Tuesday, as the market fell after failing to sustain a rally on support from wheat and short-covering, traders said.

 

September corn ended down 10 1/4 cents to US$5.25 1/4, December corn ended down 10 1/2 cents to US$5.45 and March corn ended down 11 cents to US$5.64 3/4.

 

The market was up and down throughout the day. Prices were several cents lower in early trading, climbed as much as 10 cents higher around mid-day, and dropped several cents late in the session.

 

After being swept away in broad-based commodity liquidation Monday, traders and analysts said the pressure from that sell-off might be easing.

 

"I think there's exhaustion of the fund-selling, at least for now," said Joel Karlin, analyst for Western Milling.

 

Trading was thin during a mid-day rally as the market climbed on short-covering and support from wheat, which was also thinly traded, a floor analyst said. The market remains "on pins and needles" due to significant fund liquidation in recent days, a trader said.

 

"That said, I think the worst of the selling pressure is behind us, especially in the grains markets," he added.

 

The market has little fundamental news to support it, however. Favorable weather, which has caused the market to break more than US$2 in a month, continues to be ideal for the crop, with periodic rainfall and moderate temperatures, traders said.

 

Many traders and analysts are now expecting a strong crop. Commodity risk management firm FC Stonnee projected yields at 154.5 bushels per acre on Monday, and on Tuesday private analytical firm Informa Economics projected yields of 155.4 bushels, which would be 4.3 bushels above last year and the second- highest on record. Informa estimated total corn production at 12.33 billion bushels.

 

The estimates are higher than the U.S. Department of Agriculture's July projected production of 11.715 billion bushels and projected yields of 148.4 bushels per acre.

 

The private estimates were bearish, but had little effect on the market, traders said.

 

Some analysts said the estimates might be overly optimistic considering the significant flooding that hit the U.S. corn belt in June.

 

"It would be pretty surprising to get that kind of yield considering where we started the crop," said Jerry Gidel, analyst for North America Risk Management Services.

 

Karlin said he expects the USDA will be cautious when it releases new estimates on Aug. 12, and "might not go beyond 150" bushels per acre for yield.

 

CBOT oats futures ended slightly higher. September oats were down 3/4 cent to US$3.59 3/4 per bushel, December oats were down 1/2 cent to US$3.78 1/2 and March oats were down 1/4 cent to US$3.97 3/4. Screen traders pushed prices higher at the open, and oats were not following other markets, a trader said. "We were the first ones to go higher," he said.

 

Ethanol futures ended lower. September ethanol was down US$0.041 to US$2.206 per gallon and December ethanol was down US$0.045 to US$2.205.