August 9, 2008


CBOT Corn Review on Friday: Tumbles on dollar's surge, weather



A surging U.S. dollar coupled with an optimistic crop outlook continued Chicago Board of Trade corn's descent Friday, as the nearby September contract closed below US$5.


September corn was down 23 3/4 cents to US$4.98 1/2 per bushel, December corn ended down 23 3/4 cents to US$5.18 1/4 and March corn ended down 23 3/4 cents to US$5.38.


Corn had little of its own fundamental news as the trade awaits the U.S. Department of Agriculture's production report Tuesday. But outside markets continued the plunge for corn.


"I think people were expecting some evening of positions ahead of the report, but that was certainly not the case today," said Dave Marshall, an independent marketing advisor and commodities broker in Nashville, Ill.


He said the "triumvirate" of a stronger U.S. dollar, lower crude-oil prices and good weather combined to keep prices lower.


Traders were focused on the dollar, which has surged versus the euro. That has raised concerns about declining U.S. export demand, analysts said. There are also concerns about world demand due to China, whose ravenous appetite for commodities has boosted demand leading up to the Olympics. Some see their demand tapering off now that the Olympics have started.


Grain and soybean futures are "all tarred with the same brush," Marshall said.


The trade had been anticipating US$8 corn as recently as late June, when the December contract hit US$7.99 1/4. September broke below US$5 for the first time since January on Friday.


"There's a lot of uncertainty right now," a trader said.


Still, after a historic rally during the past year, Marshall noted that US$5 is still as high as nearby corn has ever been on Aug. 8. The market is also extremely oversold, some traders said.


Volume was not very high at the end of this week, and two-thirds of Friday's trade was spread-driven, a trader said.


"That goes to show we're not seeing huge outright futures trade," he said.


Weather remains bearish, with cooler temperatures and periodic rain in the forecast mostly putting to rest fears of heat damaging the developing crop. The trade will soon begin to look ahead to early frost threats, which would be bad for the crop and likely spark a rally, analysts said.


The USDA's crop-production report is scheduled for release Tuesday at 8:30 a.m. EDT. Analysts expect increased projections for yield and total production following weeks of ideal crop weather.


CBOT oats ended lower. September oats were down 4 cents to US$3.56 per bushel, December oats ended down 4 cents to US$3.75 1/4 and March oats ended down 4 cents to US$3.94 1/2. A trader said commercial buying has given the market some support, and that it is surprising oats haven't fallen further given corn's break.


Ethanol futures were sharply lower. September ethanol was down US$0.188 to US$2.040 per gallon and December ethanol was down US$0.157 to US$2.025.


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