August 13, 2008

 

CBOT Corn Review on Tuesday: Market rebounds; bearish report already traded

 

 

Brushing aside the government's bearish crop reports, Chicago Board of Trade corn futures rebounded Tuesday on sentiment that the market was oversold and that the government's projections had already been traded.

 

September corn ended up 11 3/4 cents to US$5.09 per bushel; December corn ended up 11 1/2 cents to US$5.28 1/2; and March corn ended up 11 cents to US$5.47 3/4.

 

Prices dropped in early trading following the release of the U.S. Department of Agriculture's crop production and supply-and-demand reports, but climbed steadily throughout the day.

 

The December contract fell as low as US$5.04 1/2 in early electronic trading. End-users and short-covering helped the market rebound, traders said.

 

"There just wasn't really interest in pushing it and testing the US$5 level," said Arlan Suderman, an analyst for Farm Futures. "I'm not ready to say for sure that the bottom is in, but it's becoming more difficult to press this market lower."

 

He said there have been past instances in which the market hit its seasonal low on the day of a bearish August crop report and then rallied.

 

The USDA report projected total corn production at 12.288 billion bushels, up from a July projection of 11.715 billion bushels and higher than analysts' average estimate of 11.938 billion bushels.

 

The projected yield climbed to 155 bushels per acre, up from the government's July estimate of 148.4 bushels and above trade estimates of 152.3 bushels per acre.

 

But after dropping almost US$3 since late June, traders said the market had already traded the optimistic crop outlook. Weeks of periodic rain and moderate temperatures have boosted the crop, traders said.

 

"It's sell the rumor, buy the fact," a trader said.

 

Spread trading was also a feature of Tuesday's market, traders said. UBS bought 500 contracts of CBOT December corn and sold 500 contracts of CBOT December wheat.

 

The trade is already looking ahead to the last several weeks of the growing season. A late planted crop has raised concern that an early frost or even a typical first frost would damage yields.