August 21, 2008

 

CBOT Corn Review on Wednesday: Higher on weather worries, fund buying

 

 

Chicago Board of Trade corn futures CBOT corn futures rose to new 2 1/2-week highs Wednesday on technically linked fund buying and on speculation about how much rain dry areas of the corn belt might receive in near term, traders and analysts said.

 

September corn rose 10 1/2 cents to US$5.75 1/4 and most-active December added 10 1/2 cents to settle at US$5.95 a bushel.

 

"We definitely saw some follow-through technical buying, but it looks like the market did run into resistance around US$6," said Doug Houghtonne, analyst with Brock Associates in Milwaukee.

 

Bullish traders may be targeting the late-July highs of US$6.22 a bushel on December corn, he said.

 

Weather continues to be the market's focus, however, and dry conditions across the corn belt remain supportive for prices.

 

"There doesn't seem to be much rain in the forecast for the next 10 days or so. There has been some talk that rain from Tropical Storm Fay may reach parts of the Midwest this weekend or early next week, though that doesn't seem to be developing in the weather forecasts," said Houghtonne.

 

One computer-guided weather model points to wetter conditions in the eastern half of the belt late this week and into Tuesday, but Meteorologist Mike Tannura of T-Storm Weather said in an email that the models are fluctuating due to Fay's influence and will likely change this far in advance.

 

While trading in the key crude oil and precious metals was choppy, their rebound back into higher ground was supportive for the grain markets, a broker said. The market's improved technical prowess also enticed bulls as prices raced to new highs for the recent move but ultimately bumped into resistance just below US$6.00, an analyst said.

 

Scattered showers are forecast to bring anywhere from 0.10-0.75 inch of rain to areas of the Midwest on Thursday and Friday. The heaviest amounts are expected in northern Missouri and eastern Iowa, with locally heavy rains possible in parts of Illinois and Wisconsin, DTN Meteorlogix said.

 

In addition to the immediate weather concerns, traders are also on guard this year for an early frost, which could potentially do significant damage to the crop that is well behind in development because of the cool, wet spring. Shorter days also mean the filling crop will see fewer hours of sunlight to advance it toward maturity.

 

One route of the eastern leg of the 2008 Pro Farmer Midwest Crop Tour found good yield potential and crops that are more mature than the ones seen in Indiana. Illinois is the nation's second-largest corn producer, behind Iowa.

 

Funds were estimated to have purchased about 6,000 corn contracts.

 

In other markets, CBOT oat futures bucked the higher trend on the trading floor and closed lower. September oats slipped 1 1/2 cents to US$3.68 per bushel, and December oats shed 1 1/2 cents to US$3.87 1/2.

 

Ethanol futures settled higher. September ethanol rose 8 cents to US$2.278 per gallon, while December ethanol jumped 8.1 cents to US$2.271.

 

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