August 16, 2008

 

CBOT Corn Review on Friday: Sharply lower on outside pressure

 

 

Outside markets and broad economic concerns pushed CBOT corn futures sharply lower Friday, as the market erased much of its rally this week.

 

September corn ended down 28 cents to US$5.29 3/4 per bushel, December corn ended down 27 3/4 cents to US$5.49 1/2 and March corn ended down 28 cents to US$5.68 1/2.

 

An optimistic crop outlook continues to weigh on the market, traders said, but Friday's fall was largely attributed to strength in the U.S. dollar and weakness in other markets, particularly crude oil. Prices were down 30 cents, the daily trading limit, for part of the day.

 

"I think without question, the overriding factor remains the commodity sector as a whole," a trader said.

 

The stronger dollar makes U.S. exports less attractive, and the global economic concerns that are helping boost the dollar also raise questions about demand for commodities, traders said.

 

Friday's drop followed a three-day rally that analysts said was overdone. Prices climbed nearly 60 cents in a technical reversal following the release of the U.S. Department of Agriculture's crop production report, which was bearish, on Tuesday.

 

"Fundamentally, there was no reason for the sharp rebound over the past couple days, and the perception seems to be that every day the crop is getting larger," said Joel Karlin, analyst for Western Milling.

 

Many traders and analysts have said the market likely established a short-term bottom on the technical reversal, although that sentiment had weakened Friday.

 

"I think we're certainly going to test the lows again," Karlin said. December hit an intraday low of US$5.04 1/2 on Aug. 12.

 

Despite Friday's losses, "corn, believe it or not, closed higher on the week," a trader noted. Prices closed 7 to 8 cents higher than a week ago.

 

Fund activity has contributed to the volatility, analysts said. Funds have liquidated heavily in recent weeks, and did not show strong signs of buying back into the market during this week's rally, they said.

 

Although traders said concerns about dry weather in the U.S. corn belt in the long-range forecast may have boosted prices Thursday, they said Friday that the threat was of little significance and that weather was benign.

 

CBOT oats futures were lower. September oats ended down 8 cents to US$3.73 1/2 per bushel, December oats ended down 8 cents to US$3.93 and March oats ended down 8 cents to US$4.11 1/2.