October 17, 2008
CBOT Corn Review on Thursday: Losses minimized as equities strengthen
Chicago Board of Trade corn futures moderated their Thursday losses as the market closed and equities moved into positive territory.
The most-active December corn lost 3 1/2 cents to settle at US$3.84 1/2 a bushel, off the day's low of US$3.71 1/2. March corn dropped 4 cents a bushel to close at US$4.01 1/2.
The Dow Jones Industrial Average was down 27 points when corn futures closed, recovering from triple-digit losses. The Volatility Index rose to a a record.
As corn futures trading wrapped up, crude oil dropped nearly US$5 and the U.S. dollar maintained strength.
"We're still in a deflationary mode with continued liquidation, lower lows and lower highs," A CBOT floor trader said. But he added he is encouraged to see a trading range that is inspiring "a good change of ownership with end users becoming willing to take some long positions."
Speculative funds sold an estimated 5,000 CBOT corn contracts.
Fundamental strength is being exhibited in the cash market as well.
"Our markets are getting cheap" and while outside markets are still driving trading sentiment, corn should soon find strength on fundamentals levels, a CBOT floor trader said. "Basis is appreciating with increased consumer demand."
But ethanol demand is elastic and subject to pressure as crude oil falls, he added.
Traditional harvest price pressure is weaker than usual, and farmers are reluctant to sell levels near 14-month lows.
Even after the U.S. Department of Agriculture's surprise estimated 1.7 bushel-per-acre yield increase revision released Friday, more surprises might be on the way thanks to mild weather late in the season, an analyst said.
"Given the extended growing season and glowing yield reports from the field, we think that the likelihood of additional yield increases this year for the U.S. corn crop are quite good," analyst Joel Karlin noted in his weekly Western Milling newsletter.
Colder temperature don't appear to pose any threats.
"Several regions in the corn belt experienced their first hard freeze last night and early this morning," said Alan Brugler, president of Brugler Marketing & Management. "Damage from the frost should be minimal and may be beneficial in helping crops dry down."
In other markets, CBOT December oat futures closed 3 1/2 cents lower at US$2.80 1/2 a bushel.
Ethanol futures dropped. The nearby December ethanol contract closed US$0.046 lower at US$1.651 per gallon.