October 30, 2008


CBOT Corn Review on Wednesday: Up on short-covering, technical strength



Chicago Board of Trade corn futures soared Wednesday on weakness in the dollar and anticipation of an interest rate cut by the U.S. Federal Reserve, traders said.


December corn ended up 30 cents, its daily trading limit, to US$4.20 3/4, and March corn ended up 30 cents to US$4.38 1/4.


Corn soared in the morning and retreated slightly in the middle of the day before climbing back to the 30-cent limit before the close. There was no synthetic trade at the close, however, a trader said, adding that corn traded below the 30-cent limit even during the final minute of trade.


The market had follow-through buying from Tuesday's rally and was boosted by Tuesday's sharp rally in the U.S. stock market, analysts said. Although stocks were relatively flat Wednesday, commodities across the board rose as traders covered short positions ahead of the Fed's announcement. The Fed did in fact cut interest rates to 1.0% as anticipated, just as the grains markets closed.


"Given how far we've [fallen], it's prudent to say we've seen some covering," says Bill Nelson, grains analyst for Doane Advisory Services.


The market rode technical momentum on the way to limit up, hitting buy stops around US$4.10, traders said. It also broke and closed above the 20-day moving average for the first time since Sept. 24.


Given corn's dramatic drop in recent weeks, large rallies such as Wednesday's are to be expected, traders and analysts said.


"Now the question is: after the more-than US$4 price drop from summer highs, how large an upside retracement will we see?," DTN analyst David Fiala asked in a market commentary.


Weather is seen as beneficial to the crop, with warm, dry weather expected for the next few days in the U.S. corn belt.


Corn's trading limit will be an expanded 45 cents on Thursday.


CBOT oats rebounded from steep losses this week, ending limit up. A trader said the market has undergone a change of ownership this week from funds to commercials. The market opened strong amid commercial buying, "then we just played follow the leader," the trader said. December oats ended up 20 cents to US$2.39 1/2 per bushel and March oats ended up 20 cents at US$2.57.


Ethanol futures ended higher. December ethanol ended up US$0.119 to US$1.822 per gallon and January ethanol ended up US$0.122 per gallon.


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