August 14, 2008

 

CBOT Corn Review on Wednesday: Jumps on technical support, outside markets

 

 

Spillover support and technical momentum propelled Chicago Board of Trade corn futures Wednesday, as the market climbed its 30-cent daily trading limit.

 

September corn ended up 30 cents to US$5.39 per bushel, December corn ended up 30 cents to US$5.58 1/2 and March corn ended up 30 cents to US$5.77 3/4. The December contract traded between US$5.68 and US$5.70 synthetically.

 

With the U.S. Department of Agriculture's crop production report now in the past, traders and analysts said the market has shifted to a post-report mindset and is taking a new look at corn's fundamentals.

 

Some analysts said there remain questions about the crop, and whether the USDA's projections were too optimistic, particularly for Iowa. The trade has turned its attention to the potential for an early frost to cause significant damage to yields, traders said.

 

"I think that egg kind of hatched today, because the wheat was able to find some good, strong support, and didn't drag the corn down at all today," said Mike Zuzolo, senior analyst for Risk Management Commodities.

 

Sharply climbing crude oil helped drive corn higher, and strength in wheat and soybeans allowed the markets to "feed off each other," a trader said.

 

The USDA's report, which included increased projections for yield, production and ending stocks, was not a factor Wednesday, and had already been traded by the time it was released Tuesday, traders said.

 

"Yesterday's report is like yesterday's newspaper," a floor analyst said. "It's not here any more."

 

Traders said the technical reversal, which started Tuesday, has prompted buying by funds, which had been liquidating in recent weeks. JP Morgan was noted buying 1,500 December contracts synthetically.

 

However, traders and analysts said it's not yet clear if funds will return in great numbers to buy the markets. There is caution because of concerns with the economy as a whole, analysts said.

 

"It would be nice to see all asset classes go up here for a while," Zuzolo said.

 

A trader said that although he didn't see any bullish news to prompt a sustained rally, corn has "a lot of room to run technically and fundamentally" after breaking almost US$3 in less than two months.

 

Thursday's trading limit will be an expanded 45 cents.

 

CBOT oats futures ended higher on spillover support from other markets. September oats ended up 14 3/4 cents to US$3.71 3/4 per bushel, December oats ended up 14 1/2 cents to US$3.91 and March oats ended up 14 1/2 cents to US$4.10. A trader said oats were slow to follow other markets and that volume remained low as prices climbed. "It felt like a false rally to me," he said.

 

Ethanol futures ended sharply higher. September ethanol ended up US$0.135 to US$2.235 per gallon and December ethanol ended up US$0.102 to US$2.205.