November 18, 2008


CBOT Corn Review on Monday: Climbs amid short-covering; demand weighs



Chicago Board of Trade corn futures ended slightly higher Monday, boosted by short-covering amid continued weak demand and mixed outside markets, traders said.


December corn ended up 5 1/2 cents to US$3.85 3/4 per bushel, March corn ended up 6 cents to US$4.03 and May corn ended up 6 1/4 cents to US$4.14 3/4.


Traders said there was little news to support corn's climb. An analyst said buyers were encouraged by the fact that corn hasn't approached its recent seasonal low in the December contract of US$3.60 1/4, set Nov. 11.


"The longer the market trades sideways, it will increase the perception that a bottom is in there," said Joel Karlin, analyst with Western Milling.


Analysts said corn's strength late last week prompted short-covering. Corn-wheat spread trading was also noted, with wheat dropping 20 cents even as corn climbed.


Monday's climb in corn came despite little support from outside markets. Crude oil dropped, and corn opened the day higher despite early bearishness in the U.S. stock market. A trader said grains could be divorcing themselves from outside markets, although similar predictions in recent weeks haven't come to pass.


Despite the gains, analysts warn that poor demand continues to hang over the corn market. Export inspections reported Monday by the U.S. Department of Agriculture were slightly above analyst expectations but still very weak, analysts said. Bill Nelson, grains analyst with Doane Advisory Services, said recent export inspections and sales numbers have been "incredibly bad."


It's normal for export sales to dip on occasion, but sales have been low for a sustained period.


"This is getting kind of old," Nelson said. After a while, it starts to seem that "maybe this is the real deal," he said.


Demand has been weakening because of the global economic downturn, and corn faces additional competition from a large amount of feed-quality wheat in the market, analysts said.


The harvest remains behind schedule, although traders said more fieldwork should get done this week as the U.S. corn belt sees cold, dry weather.


CBOT oats futures were virtually unchanged. December oats settled flat at US$2.15 1/2 per bushel and March oats ended down 1/2 cents to US$2.31.


Ethanol futures ended higher. December ethanol ended up US$0.036 to US$1.697 per gallon and January ethanol ended up US$0.049 to US$1.699.


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