September 13, 2008


CBOT Corn Review on Friday: Jumps on technical strength, USDA report



Bullish government crop estimates, a weaker U.S. dollar and technical momentum sent Chicago Board of Trade corn futures sharply higher Friday, traders said.


December corn ended up 30 cents, the daily trading limit, to US$5.63 1/4 and March corn ended up 29 3/4 cents to US$5.82. The September contract, which stopped trading Friday, ended up 25 1/4 cents to US$5.47 1/2.


The government's report, which cut crop production and yield estimates, wasn't a big surprise to the trade, but it nonetheless provided underlying support to the market, traders and analysts said.


"I think it gives us enough fundamental support that it allows recent lows at US$5.31 (for December corn) to represent an interim bottom," said Shawn McCambridge, senior market analyst with Prudential-Bache.


The government's projected corn production of 12.072 billion bushels and corn yield of 152.3 bushels per acre were lower than last month's estimates and below analysts' average estimates. Analysts on average expected September USDA estimates of 12.152 billion bushels and a yield of 153.3 bushels per acre.


December traded synthetically at US$5.64 1/2, a trader said. Another trader said the late surge would carry over into trade early next week.


"Look for follow-through Monday," he said. "I think this puts the low in for a while."


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


The market was oversold technically, analysts said. Upside potential may be limited because ethanol margins will suffer if corn climbs and crude oil holds steady, as it did Friday, a trader said.


There were several factors working in the corn market Friday, a trader said, adding that it was "tough to put a finger on" why corn was a leader among the markets.


Weather was seen as a minor factor Friday, although traders noted potential support from significant rainfall from Hurricane Ike could cause more problems in Missouri plus forecasts indicating a frost threat in about two weeks.


Corn was also supported by a weaker dollar, although a trader said he thought a potential top in the dollar wouldn't last long. A stronger dollar has been a key factor pushing prices lower recently, as a stronger dollar makes exports less attractive.


Traders said the USDA report might give the corn market the fundamental support it needs to break free of the grip of outside markets.


CBOT oats futures ended higher. A trader said that despite support from sharply higher corn, oats' gains were limited by bearish USDA production estimates. December oats were up 4 1/2 cents to US$3.34 1/2 and March oats were up 4 1/2 cents to US$3.52.


Ethanol futures ended higher. December and January ethanol both ended up US$0.052 to US$2.197 per gallon.


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