December 17, 2008


CBOT Corn Review on Tuesday: Climbs on technical, end-user buys, weaker dollar



Technical momentum, end-user buying and a weaker dollar pushed Chicago Board of Trade corn futures sharply higher Tuesday, traders said.


March corn ended up 18 3/4 cents to US$3.94 per bushel, May corn ended up 18 3/4 cents to US$4.05 1/4 and July corn ended up 19 cents to US$4.16 1/4.


The March contract closed above its 50-day moving average for the first time since July 11.


Signs that the market has bottomed have encouraged more buyers, traders and analysts said.


"If you're an end-user and you've worked down inventories, there are some clear signs that you need to rebuild them," said Dave Marshall, an independent commodity advisor and broker in Nashville, Ill.


He noted that both commodity and freight prices appear to be rebounding. Analysts added that basis has strengthened as farmers remain reluctant to sell and transportation is slowed due to harsh winter weather in the U.S.


As of Dec. 5, funds had reduced their net long positions to nearly flat in futures-only positions but are now long an estimated 55,000 contracts, said Citigroup analyst Terry Reilly.


Reilly also noted some unwinding of the corn/soybean spread. That spread has narrowed since Informa Economics' report last week projecting decreased corn and increased soybean acreage next year. That report continues to offer support, with one trader saying it "appeared to change the mindset" of the trade.


But traders and analysts also warn that corn's basic supply and demand situation is still far from bullish. After a strong week of export sales last week, Reilly expects this week's figure to drop by about 50%. Traders and analysts also note the USDA supply and demand report last week that projected increased ending stocks.


"Maybe there's new demand showing up here," a trader said. "But I still think there are shorts hanging around."


Dry weather in South America and weakness in the U.S. dollar also supported corn, analysts said. Corn climbed despite a dip in crude oil prices.


CBOT oats futures ended higher. A trader said outside markets were supportive but that fund selling is limiting the market's gains. March oats were up 10 cents to US$2.26 per bushel, May oats were up 9 1/2 cents to US$2.35 and July oats were up 9 cents to US$2.44.


Ethanol futures were higher. January ethanol ended up US$0.040 to US$1.587 per gallon and March ethanol ended up US$0.071 to US$1.619.


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