October 9, 2008
CBOT Corn Review on Wednesday: Rebounds on short covering, cash prices
Chicago Board of Trade corn futures rebounded Wednesday amid short covering and strong cash prices, ending higher for the first time in 10 days.
December corn ended up 10 1/2 cents to US$4.27 1/2 and March corn was up 10 1/2 cents to US$4.44.
After dropping 29% since Sept. 24, the market was "acutely oversold" and due for a bounce, traders said. The market was also lower early Wednesday but climbed in the afternoon in a short-covering rally, an analyst said. Prices failed to test US$4, which traders said was important psychological support for a market that almost hit US$8 in late June.
"I wouldn't be surprised if we had a couple of pops ahead of Friday's report," said Western Milling analyst Joel Karlin, referring to the U.S. Department of Agriculture's production and supply-and-demand reports.
Karlin added that strong cash prices were supportive, as producers are holding on to their corn, waiting for the market to rebound.
"Farmers are very irritated at letting US$4 fly out the window, so they're going to hold on to their stuff," he said.
Fund liquidation remains a looming presence in the market, analysts said, as corn and other agricultural commodities remain tied to a global economic crisis. Analysts said the crisis has caused money to flow out of commodities and created a gloomy demand picture.
The trade watched U.S. stocks throughout the day for direction, and corn opened lower after equities failed to sustain a rally despite Wednesday morning's decision by world central banks to lower interest rates.
Traders noted that Friday's USDA reports have prompted little discussion this week, unusual preceding what are normally considered important reports. The trade expects virtually unchanged corn production and yield. The government's corn ending stocks projection is expected to climb due to reduced demand.
Analysts said it could take a jolt from the reports or through increased export sales to start a sustained rally in corn.
CBOT oats futures ended slightly lower. December oats were down 3/4 cent to US$2.93 and March oats were down 1/2 cent to US$3.10.
Ethanol futures were higher. December ethanol ended up US$0.017 to US$1.840 per gallon and January ethanol ended up US$0.012 to US$1.839.