December 20, 2008

 

CBOT Corn Review on Friday: Falls on technical weakness, crude, demand

 

 

Chicago Board of Trade corn futures ended lower Friday on bearish outside markets as bulls failed to find reasons to extend corn's recent rally, traders said.

 

March corn ended down 8 3/4 cents to US$3.80 3/4 per bushel, May corn ended down 9 1/4 to US$3.91, and July corn ended down 9 3/4 cents to US$4.01 per bushel.

 

Crude oil, particularly the front month January contract, continued to fall, extending concerns about the ethanol industry and weighing on corn. Demand across the board is weak, analysts said, and technically the market was due for a setback after rallying about US$1.

 

"The bottom line is that demand for corn is really poor in all sectors, whether it's industrials, feed or exports," said Joel Karlin, analyst for Western Milling. "It's difficult to fathom how higher prices are going to help that situation."

 

He said corn's recent rally from a low below US$3 was fueled by short-covering, not new buyers entering the market. With the market unable to crack US$4, the bullish sentiment waned amid a lack of supportive news.

 

Volume was light Friday ahead of the Christmas holiday next week. Despite Friday's losses, March corn still climbed 7 1/4 cents on the week and May corn posted a weekly gain of US$3.84 3/4.

 

The trade is keeping an eye on the crop in South America, where hot, dry weather has raised concerns in Brazil and Argentina. On Friday, the Buenos Aires Cereals Exchange said hot, dry weather is slowing corn planting and will likely lead to a further reduction in planted area.

 

Argentina's corn planting will fall to 2.44 million hectares this season, according to the exchange's current forecast, down sharply from the 3.2 million hectares last season.

 

The dry weather and higher relative profitability expected with growing soybeans is spurring the shift.

 

CBOT oats futures ended lower. March oats ended down 3 cents to US$2.19 per bushel and May oats ended down 3 cents to US$2.28.

 

Ethanol futures dipped slightly. January ethanol ended down US$0.003 to US$1.570 per gallon and March ethanol ended down US$0.008 to US$1.580.