October 7, 2008
CBOT Corn Review on Monday: Ends limit down on concerns about economy
Concern about the global economy and plunging equities overwhelmed CBOT corn futures, which ended limit down Monday.
December corn ended down 30 cents, the exchange-imposed daily trading limit, to US$4.24 a bushel and March corn ended down 30 cents to US$4.42 1/2. Corn was trading around US$4.12-US$4.13 at the close, traders said.
Although corn and other commodities were firm on Friday as the U.S. House passed a rescue package for the financial sector, "everyone got all 'beared up' over the weekend," said Sid Love, analyst with Kropf and Love consulting.
Funds still hold significant long positions, but continue to liquidate, analysts said.
"Everyone's going over the side," Love said.
Monday's plunge follows a loss of 16.4% last week, and traders said they are unable to predict a bottom in the corn market because of an outside environment that one trader called "scary and different."
"We're getting to the point now where we're below production costs. It's crazy," a trader said.
One analyst quipped that the bottom in the market was "75 cents ago."
Concern about the European economy and a stronger U.S. dollar were both bearish for commodities, analysts said. The corn market is unlikely to stabilize until other markets do, traders and analysts said.
"This whole outside market is something we haven't traded before," said Shawn McCambridge, senior grains analyst for Prudential-Bache.
A trader said the sentiment is the complete opposite of the spring mindset, when a sharply lower dollar and booming demand drove prices to historic highs, ultimately nearing US$8 in the nearby contract in late June.
Traders are paying little attention to the crop right now. One trader said the lack of a frost threat is bearish for the market, while another trader said that traded in a vacuum, the market could have climbed Monday on the basis of recent rains that may slow harvest.
Tuesday's trading limit will be an expanded 45 cents.
CBOT oats futures ended lower, with the nearby contract falling below US$3 for the first time all year. December oats ended down 20 cents to US$2.94 a bushel and March oats ended down 20 cents to US$3.11. A trader said oats followed other markets lower.
Ethanol futures also tumbled. December ethanol was down US$0.167 to US$1.822 a gallon and January ethanol was down US$0.163 to US$1.812.