October 13, 2009

 

CBOT Corn Review on Monday: Up on weather, technical strength, soy

 

 

Chicago Board of Trade corn futures ended sharply higher Monday on weather, outside-market support and technical buying, analysts said.

 

December corn ended up 19 cents to US$3.81 1/4 per bushel, and March corn ended up 18 1/2 cents to US$3.93.

 

The market hovered around US$3.74 in the December contract for much of the day after opening more than a dime higher, but once it climbed above resistance at US$3.76 late in the day, the market quickly surged above US$3.80.

 

Soggy, cold weather is supporting the market, traders said.

 

Although analysts say the bulk of the potential freeze damage to the crop has already happened, the cold, wet conditions forecast for this week will continue to stall harvest this week.

 

The majority of the corn belt - including Illinois, Missouri, Indiana and Ohio - will see one-third inch to 1 inch of rain Tuesday through Thursday, said John Dee, president of Global Weather Monitoring. Temperatures should average about 10 to 15 degrees below average, he said.

 

"It's going to be a struggle" to harvest, Dee said. "The cold temperatures are really going to retard drying. I've seen worse, but it doesn't look good at all."

 

Traders said the delayed harvest is creating tight near-term supplies.

 

While the weather is widely seen as supportive, some traders say fundamentals are not the major driver of the recent rally. McCambridge said the rally is driven by technical trading and that a correction is likely. Despite the recent bullishness, few traders or analysts are forecasting a run at US$4.

 

"I don't have a lot of confidence in this rally to begin with," McCambridge says.

 

A floor trader said the rally is due to a weaker dollar and increased fund buying. Funds bought an estimated 10,000 contracts Monday.

 

In addition to the weaker dollar, corn was led higher by soy, which were sharply higher as that market rallies following Friday's crop projections from the U.S. Department of Agriculture.

 

The delayed harvest is creating tight near-term supplies, traders added.

 

The market also has an improving demand outlook, traders said, with ethanol in particular enjoying good profits and increased production.