August 7, 2008


CBOT Corn Review on Wednesday: Slump continues on weather, liquidation



Good crop weather and continued fund liquidation of commodities sent Chicago Board of Trade corn futures lower Wednesday, as the market approached the US$5 mark for the nearby September contract.


September corn ended down 17 1/4 cents to US$5.08 per bushel, December corn ended down 17 1/4 cents to US$5.27 3/4 and March corn ended down 17 1/2 cents to US$5.47 1/4.


Liquidation across a range of commodities continued to pressure corn, with weaker soybeans in particular weighing on the market. September soybeans ended 45 1/2 cents lower at US$12.13 1/2 per bushel.


"The way this bull market has been, for many of the speculative interests, if they were long beans they were long corn," said John Kleist, broker/analyst for Allendale in McHenry, Ill.


Much of Wednesday's drop was due to "weather and technical liquidation," said Brian Hoops, president of Midwest Market Solutions. Hoops said the market could find support around US$5.21 for the December contract.


The nearby September contract is approaching US$5, which some analysts see as important psychological support. Just more than a month ago the trade was talking about hitting US$8 corn, which the December contract almost did, peaking at US$7.99 1/4.


A significant rebound is considered unlikely unless an important weather event emerges to threaten the crop. However, some analysts say the market could be oversold and due for a rebound.


"In some ways, this last dollar down seemed more margin-call related and speculative loss related, and not necessarily fundamentally related," Kleist said.


Other than the weather, which remains ideal for the crop and bearish for the market, analysts said there was little fundamental news for corn on Wednesday. One item that was bearish was an increase in China's projected corn output announced Wednesday by the country's government. The projection was raised 2 million metric tonnes to 156 million metric tonnes.


Traders are looking ahead to the U.S. Department of Agriculture's production estimates for the domestic crop, which are scheduled to be released Monday. The trade expects the government's yield estimate to climb from its July projection of 148.4 bushels per acre, with some analysts projecting yields of 155 bushels or higher.


However, analysts caution that the crop is not "in the bin" and that an early frost would be a significant blow to a crop that is behind schedule.


CBOT oats futures ended down slightly. September oats were down 2 3/4 cents to US$3.57 per bushel, December oats ended down 2 1/2 cents to 3.76 and March oats closed down 2 1/2 cents to US$3.95 1/4.


Ethanol futures ended lower. September ethanol was down US$0.047 to US$2.159 per gallon and December ethanol was down US$0.075 to US$2.130.


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