August 29, 2008

 

CBOT Corn Review on Thursday: Rainfall in corn belt drags market lower

 

 

Chicago Board of Trade corn futures ended lower Thursday on rainfall in the U.S. corn belt and a break in crude oil, traders said.

 

September corn futures ended down 7 1/2 cents at US$5.70 per bushel, December corn ended down 8 1/4 cents to US$5.87 3/4 and March corn ended down 8 1/4 cents to US$6.06 3/4.

 

Rainfall in parts of Iowa, Minnesota, Wisconsin and Illinois overnight and into Thursday gave the crop some much-needed moisture, traders said, and assuaged fears that it is going to suffer yield damage because of dryness. The rainfall covered a wider area than expected, traders said.

 

An analyst said the market has been trading based on yield expectations since the government's Aug. 12 crop production report, which projected the national yield at 155 bushels per acre. Many in the trade thought that projection was too high and adjusted prices accordingly, in line with a yield around 150 bushels. But traders' outlook for the crop is becoming more optimistic again, the analyst said.

 

"As far as the corn market, I think that's what we're trading right now. It's a moving target based on that yield," he said.

 

Traders said the market was also influenced by crude oil prices, which fell more than US$2.50 despite concerns about Tropical Storm Gustav and its possible path toward the U.S. Gulf Coast and the nation's oil infrastructure.

 

Funds continued to sell Thursday, and traders said the market remains a victim of a weak environment for commodities generally. Corn prices opened lower and remained in negative territory all day, although the market did trim its losses.

 

"It seems we're just in liquidation mode right now," a trader said.

 

Spread trading continued to be a dominant feature of the market ahead of first notice day, which is Friday, traders said. Traders and analysts have widely varied expectations for deliveries against the September contract on Friday, with estimates ranging from 300 contracts to 1,500.

 

Some analysts said deliveries would be high because of negative basis, while others said the late development of the crop will prompt people to delay deliveries until it is clear the crop will be okay.

 

Traders are on the lookout for any signs of an early frost, which would be particularly damaging to this year's crop because it is behind schedule, but so far there is no cold snap in the forecast.

 

CBOT oats futures ended lower. A trader said the market fell amid fund selling for much of the day and trimmed its losses late on a modest corn rebound. September oats were down 8 1/2 cents to US$3.42 per bushel, December oats fell 8 1/2 cents to US$3.60 and March oats dropped 8 cents to US$3.78.