October 16, 2008


CBOT Corn Review on Wednesday: Drops under US$4 as Dow Jones Industrial Average tanks



Chicago Board of Trade corn futures shot through a tighter trading range established in early trading Wednesday to burst the US$4 support level and triple the extent of their losses by closing.


The most-active December corn dropped 23 1/4 cents to settle at US$3.88 a bushel, just off the day's low of US$3.85. March corn dropped 23 1/2 cents a bushel to close at US$4.05 1/2.


Agricultural commodities are following declines in U.S. stock markets and crude oil "tick for tick," a CBOT floor trader said.


Corn appeared to have strength earlier, but "every time it looks like you get something going, it takes a hit," he added.


Grain trading will return to more traditional cues when the equities markets settle into a calmer trading range, he said.


"When we find a range in the outside markets, we can go back to trading fundamentals," he said. "But we'll always have an eye on crude."


The Dow Jones Industrial Average shed more than 500 points then retraced some of its decline before grain trading closed Wednesday, as lackluster corporate earnings and a US$4 drop in oil prices feed into fears about the depth of a potential global recession.


"These are the kind of markets that will kill you because everyone tries to bottom feed," the trader said.


Small rallies are quickly extinguished when index funds sell large positions, activity that's commonly seen at the close, the trader said.


"That's why you see these large drops at the end," he said. "As a trader, that's always in the back of your mind."


Speculative funds sold an estimated 4,000 corn contracts.


In other markets, CBOT December oat futures dropped 8 cents to close at US$2.84 a bushel.


Ethanol futures also saw gains with the nearby December ethanol contract closing US$0.084 lower at US$1.697 per gallon.


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