Corn futures at the Chicago Board of Trade fell to a two-week low on Tuesday amid fund long liquidation and technical selling, traders said. Some forecasts for cooler weather in the Midwest which would help relieve stress on this year's corn crop also may have weighed on prices.
But most traders and analysts tied the sell-off in corn to the fact the crop soon will be developed and out of serious danger from hot weather and to fund long liquidation.
"Corn pressure is two-fold. Clearly the market is telling you we're exiting pollination without much damage and also with funds long 180,000 contracts starting the week, they're liquidating and heading for the exit," said Charlie Sernatinger, analyst for O'Connor and Co.
CBOT corn closed 3/4 to 5-1/2 cents per bushel lower, with September down 5-1/4 at $2.46-1/2 per bushel. December was down 5-1/2 at $2.62-1/2. "It was liquidation. The market closed terrible technically yesterday and there was follow-through today," a trader said. An estimated 198,974 futures and 53,069 options traded, compared to 179,389 futures that traded on Monday.
Traders estimated that funds sold 11,000 corn futures. The September contract broke support early at its 20 day moving average of $2.49 per bushel. That move touched off sell-stops and eventually the contract dropped below key support at its 200-day moving average of $2.45-1/2, then recovered to end just above that level at $2.46-1/2.
Traders said the corn market may be trying to find a bottom and to consolidate around these price levels after two straight days of declines. But they said there remains the potential for volatile price swings as Midwest weather patterns keep shifting.
USDA late on Monday said 62 percent of the US corn crop was in good to excellent shape, down from 63 percent a week ago but above the 55 percent rating a year ago.
USDA also said 51 percent of the crop was in its critical silking or pollinating stage of development. Extreme heat while the crop is pollinating can cut production prospects.
Weather stress remains a concern in parts of the Midwest corn and soybean growing region, a private forecaster said on Tuesday. "The area hit hardest now is northern Iowa, South Dakota, southern Minnesota and north-west Illinois," said Meteorlogix forecaster Joel Burgio.
Burgio said temperatures soared into the 90s (degrees Fahrenheit) to 100 F in the west on Monday and the heat wave would continue through the week, with cooler temperatures expected on Friday and Saturday. Export activity early this week failed to generate any significant bullish momentum for corn futures.
China's largest feed producer, New Hope Group, has bought 6,000 tonnes of corn from the US, a top official said in Shanghai on Tuesday.
And South Korea's corn imports fell 4.1 percent in the first six months of 2006 from the same period a year earlier, industry data in Seoul showed on Tuesday. Spot basis bids in the Midwest late Tuesday were steady to firm amid light farmer selling, dealers said. Oat futures closed unchanged to 4 cents per bushel higher on technical gains. September was up 2-1/4 at $1.99-3/4 per bushel. Volume was moderate estimated at 1,332 futures and 17 options.