September 30, 2008

 

CBOT Corn Review on Monday: Tumbles amid liquidation, failed bailout

 

 

Concerns about the world economy sent Chicago Board of Trade corn futures plunging Monday, as commodities were battered amid fund liquidation, analysts said.

 

December corn ended down 30 cents, the exchange-imposed daily trading limit, to US$5.13 per bushel, and March corn ended down 30 cents to US$5.31.

 

Outside influences set corn's direction, analysts said, as the trade eyed a U.S. government plan to bail out financial institutions. Funds continued to exit positions, analysts said.

 

Prices were sharply lower most of the day and locked limit down late in the session, when it became apparent the U.S. House would reject the government bailout proposal. Even before the vote, concern that the plan wouldn't work sent commodities lower, analysts said.

 

"Uncertainty is something that typically drives traders to get smaller, or get even," said Kent Beadle, analyst for Country Hedging.

 

Crude oil plunged, as did the stock market, adding to the day's bearish tonnee. Traders say that in addition to prompting fund liquidation, a slowdown in the world economy is bad for commodity demand.

 

Monday's close was technically bearish, analysts said, as the December contract broke below US$5.24, the bottom end of its recent trading range. A technical analyst has said the near-term direction of the market would be determined by which end of the trading range the market broke through.

 

Traders and analysts said the market could fall further, toward its August lows of US$5.04 1/2 in December and possibly beyond.

 

"We always overshoot the runway," one trader said. "We haven't overshot the runway yet."

 

Beadle said there was a "fair amount of end-user interest" at the day's low prices, but that "overall, the demand for corn is outstripped by the need for speculators to sell off their positions."

 

Fundamentals were a minor factor at best, although traders said weather was still mostly good for the crop because of a lack of a major frost threat.

 

CBOT oats futures was sharply lower. December oats closed down 17 cents to US$3.18 per bushel and March oats ended down 13 3/4 cents to US$3.35 1/4.

 

Ethanol futures ended lower. December ethanol was down US$0.078 to US$2.157 per gallon and January ethanol ended down US$0.065 to US$2.170.