October 8, 2008


CBOT Corn Review on Tuesday: Dips on financial turmoil, weak demand



Chicago Board of Trade corn futures continued to slide Tuesday, ending lower on pressure from concerns about the U.S. and world economies, traders said.


December corn ended down 7 cents to US$4.17 per bushel and March corn ended down 9 cents to US$4.33 1/2.


Prices were firm for much of the day but broke in the afternoon following a retreat in equities and crude oil, traders said. Corn fell despite modest gains in soybeans and wheat. A floor analyst called corn's attempt at a bounce following significant recent losses "laughable."


Some saw the market's plunge as a function of the financial markets and index fund liquidation, while others say it's related to concerns about how the crisis will affect export demand.


"Corn is looking for a place where it's going to price itself into more consumption," said John Kleist, broker/analyst with Allendale.


He said prices around either side of US$4 could "rekindle export demand." Rising exports would be the first sign of increasing demand, traders said.


A trader said he expected "one more bloodbath" in the market before it starts to rebound. Commercial buyers have offered some support, traders said, but continue to wait for clear signals the market has bottomed, traders said. The December contract has lost 27% of its value since Sept. 24.


Kleist pointed out that seasonally, corn usually declines this time of year, during harvest.


Weather was a mixed, but minor factor in the market, traders said, with rainfall in parts of the U.S. corn belt threatening to delay harvesting. The trade has not focused on the state of the crop recently, with traders noting that little attention has been paid to the crop production report to be released by the U.S. Department of Agriculture of Friday at 8:30 a.m.


Analysts surveyed by Dow Jones Newswires on average expect virtually no change from the government's September report. They projected an average yield of 152.3 bushels per acre and total production of 12.076 billion bushels.


Wednesday's exchange-imposed trading limit will return to 30 cents, down Tuesday's expanded 45-cent limit.


CBOT oats were slightly lower. December oats were down 1/4 cent to US$2.93 3/4 and March oats were down 1/4 cent to US$3.11 1/4. A trader said commercial buying provided underlying support for the market.


Ethanol futures were mixed. December ethanol was down US$0.002 to US$1.820 per gallon and January ethanol was up US$0.028 to US$1.840.


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