October 23, 2008
CBOT Corn Review on Wednesday: Tumbles on pressure from dollar, equities
Concerns about the world economy and a prolonged recession that could hurt demand doomed Chicago Board of Trade corn futures Wednesday, as the market opened sharply lower and stayed there all day.
December corn ended down 26 cents to US$3.85 per bushel, and March corn ended down 27 cents to US$4.00 3/4.
The trade continued to look at outside markets, including the dollar, crude oil, gold and equities for direction, analysts said. Those indicators were bearish Wednesday.
"What's happening within a market itself doesn't really matter," said Dale Durchholz, an analyst with Agrivisor. "We're still in the same rut we've been in for most of this year."
The dollar has shown strength this week as investors flee to the greenback on ideas other parts of the world are further behind in dealing with the financial crisis than the U.S., traders said.
Many traders started the week hopeful that the corn market had set its seasonal low last week, but that seemed less certain Wednesday.
"I didn't know where it ended at the top, when the dollar was getting its butt kicked and we had hyperinflation, and I don't know where deflation is," one trader said.
Equities that were sharply lower throughout the day kept corn and other commodities lower, analysts added. Durchholz said the buzz words lately have been "demand destruction," as the trade fears the effects of a worldwide recession.
But Durchholz said export sales have been relatively strong the past couple of weeks. Long term, the market's fundamentals will support gains, he added.
"The longer prices stay down, the more it raises the possibility that demand will exceed expectations, and what is penciled in today," Durchholz said.
Expected harvest delays in the western U.S. corn belt because of rain and cold weather this week are supportive but were little noticed by the market Wednesday, traders said. The crop remains behind schedule, but traders also say there are reports of better-than-expected yields for the portion of the crop that has been harvested.
July 2009 corn briefly dropped the 30-cent daily trading limit early in the day, but generally the markets stayed around 25 cents lower throughout the session. Funds sold 7,000 contracts.
CBOT oats futures ended lower. December oats were down 12 cents to US$2.65 per bushel, and March oats were down 12 cents to US$2.82 1/2.
Ethanol futures were lower. December ethanol ended down US$0.088 to US$1.645 per gallon and January ethanol ended down US$0.074 to US$1.666.