September 27, 2008

 

CBOT Corn Review on Friday: Falls on economic woes, weak demand, crop

 

 

Concern about the U.S. economic crisis continued to weigh on Chicago Board of Trade corn futures Friday, although traders said several other factors also contributed to the day's slide.

 

December corn ended down 15 1/4 cents to US$5.43 per bushel and March corn ended down 15 cents to US$5.61.

 

The grains markets continue to wait for news from Washingtonne about the government's plans to bail out the financial sector, traders and analysts said. The market is "confused" by what's happening in the financial sector, said Sid Love, analyst for Kropf and Love Consulting.

 

A meltdown in the financial sector would likely prompt more money to leave commodities, analysts said.

 

"Particularly in corn, the index funds are huge longs," Love said. "If they decide to give it up, we could be down real hard."

 

The economic concerns are also fueling concerns of reduced demand, traders said. Although a potential bailout is expected by many to create an inflationary environment, weak demand would put a lid on any rally, at least in the short-term, a trader said.

 

"Anyone who thinks this is going to run up is just out to lunch right now, because the demand isn't there," the trader says.

 

Corn had a bearish technical performance this week, traders and analysts added, with the market unable to break through it's 50-day moving average.

 

There is also talk among traders of initial yield reports coming in higher than expected, although one trader said it's "nothing tangible you can put a finger on." Some analysts, while acknowledging the chatter about improved yields, said they've heard there is a lot of variability in the crop.

 

A trader said the market had "a little pop" to the upside on concerns of a potential frost late next week. But he said the potential is still remote and that by that time, a frost may not cause extensive yield loss in many areas.

 

Volume remained very light as traders exhibit caution near the end of the month and quarter, a trader said.

 

CBOT oats futures ended lower. December oats were down 3 3/4 cents to US$3.31 1/4 and March oats ended down 3 1/2 cents to US$3.49 per bushel.

 

Ethanol futures were lower. December ethanol ended down US$0.023 to US$2.235 per gallon and January ethanol ended down US$0.029 to US$2.235.