October 29, 2008

 

CBOT Corn Review on Tuesday: Climbs on USDA revisions, equities

 

 

Outside market stability and the government's downward correction of crop production numbers helped push Chicago Board of Trade corn futures higher Tuesday, traders said.

 

December corn ended up 5 1/2 cents to US$3.90 3/4 per bushel, March corn ended up 6 cents to US$4.08 1/4 and May corn ended up 6 1/4 cents to US$4.20.

 

Traders agreed that the government's revised production estimates, released Tuesday morning, were supportive for corn, although there was debate as to whether the market actually felt much of an impact. The U.S. Department of Agriculture cut planted acres, yield, total production and ending stocks.

 

The December contract traded as high as US$4.07 in the pit, but soon dropped below US$4 and stayed there throughout the day. Funds bought an estimated 5,000 contracts Tuesday.

 

The limited gains were surprising given that the market likely would have climbed anyway due to gains in the U.S. stock market and support in other outside markets early in the day, an analyst said. Chad Henderson, analyst with Prime Agricultural Consultants, said the market "pretty much ignored the report."

 

Soybeans were lower, even though the USDA also reduced its production estimate for that crop as well. Some analysts saw the report as bullish for soybeans, although one trader said the trade was expecting more of a drop once the pending revision was announced Monday afternoon.

 

"I think it was friendly in the corn and disappointing in the beans, and that's what the market is telling us," a trader said.

 

Henderson said continuing weak demand muted the report's impact.

 

Citigroup analyst David Driscoll said in a report issued Tuesday that the USDA numbers were supportive for corn, but would not overshadow crude oil, which fell to a 17-month low Tuesday.

 

"Although this is principally bullish for corn prices, we believe the overall environment remains bearish as declining petroleum values represent a significant macro factor placing pressure on corn prices," Driscoll said.

 

Other analysts said the report could change the landscape for grains and soybeans, boosting the markets as a battle for planted acreage next year heats up.

 

Weather forecasts are favorable for the crop, analysts said, with dry weather the next several days expected to facilitate harvest activity.

 

In other markets, the plunge in CBOT oats accelerated Tuesday. December oats tumbled 18 1/2 cents to US$2.19 1/4, the lowest price since October 2006. March oats ended down 18 1/2 cents to US$2.37.

 

"Significant fund liquidation" has dropped the market 51 3/4 cents from its Monday intraday high, a trader said. JPMorgan was noted as a seller. A trader said planted acres will drop in Canada next year if the market does not rally from these lows.

 

Ethanol futures were slightly higher. December ethanol was up US$0.013 to US$1.703 per gallon and January ethanol was up US$0.010 to US$1.712.