August 19, 2008


CBOT Corn Review on Monday: Sharp gains on fund buying, crop concerns



Chicago Board of Trade corn futures rose sharply, supported by speculative fund buying, spillover from limit-up soybean and strong wheat prices, and an overall lack of selling interest, traders and analysts said Monday.


Most-active December corn added 23 1/4 cents to settle at US$5.72 3/4 a bushel for a daily gain of 4.2%.


After Friday's sell-off on profit-taking, the Chicago grain markets rebounded in a big way Monday, pushed by fund buying and concerns over the crop.


In addition, a weak U.S. dollar, and ideas that Friday's sell-off was overdone contributed to the bullish atmosphere in the pits.


Concerns that the 2008 Pro Farmer Midwest Crop Tour, which kicked off Monday morning, might find crops in worse shape than previously thought helped support prices. Lagging maturity levels, particularly in northern crop areas, are expected to keep a vein of uncertainty running through the market.


"I think people are anticipating it will show a little bit of a downward bias," said Shawn McCambridge, senior grains analyst at Prudential Bache, referring to the crop's yield potential.


The U.S. Agriculture Department currently pegs the crop at 155 bushels an acre, and the tour could find evidence that would support a yield closer to the low 150-bushel range, he explained.


Scouts on one leg of the tour, as expected, found immature crops because of a wet spring and late planting in several Ohio fields. "We have seen a crop that is consistently behind, and definitely behind what it was last year," said Roger Bernard, director of the tour's eastern leg. Fields on this leg of the tour ranged from just 65 bushels per acre to 160 bushels.


Corn futures also benefited from end-user pricing interest, as commercial firms are interested in owning the commodity with corn in the lower or mid-US$5.00-per-bushel area, McCambridge said.


Traders are also largely anticipating corn conditions to be down slightly by 1-2 percentage points when the USDA issues its weekly crop progress report at 4 p.m. EDT.


Funds were estimated to have purchased 6,000 corn contracts on the day.


CBOT oat futures also gained, with nearby September up 2 1/2 cents to US$3.76 per bushel, and December oats 2 1/2 cents higher at US$3.95 1/2.


Ethanol futures rose along with the gains in corn, September ethanol jumped 4.4 cents to US$2.18 per gallon, and December ethanol closed up 6.7 cents at US$2.18.


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