U.S. corn falls in turbulent trade, trims losses
CHICAGO (Reuters) - U.S. corn fell on Wednesday in a session of wild price swings, tumbling nearly 4 percent and rising more than 2 percent, as bearish crop weather and a resurgent dollar were pitted against bargain hunting.
Concerns over government moves to limit speculation in commodities also pressured the market, which crawled into the black as investors felt the market had fallen too much, only to slip again after buying dried up.
"Corn is very much oversold technically, we've been on a big price break so it's just coming back. There was nothing in the cash market and no new demand ... this was all technical," said Paul Haugens, vice president for Newedge USA.
The corn market's relative strength index (RSI) -- an indicator of technical momentum -- fell below 20 early in the session. A level of 30 is considered oversold.
The Reuters-Jefferies CRB Index .CRB, which tracks 19 commodities, fell 1.66 percent to an 11-week low of 414.15 points. Oil fell more than $4 a barrel to drop below $125.
Corn futures at the Chicago Board of Trade were down about 25 percent since the spot month hit a record high $7.65 on June 27, leaving analysts wondering where the bottom was.
"The psychology of support at $6.00 corn is now gone, so at around $5.00 to $5.25 they might find value, but nobody is your friend today," said Jerry Gidel, analyst for North America Risk Management Inc. "It's been five days of liquidation in a huge way and everyone is wondering where it will stop."
Traders said favorable weather in the U.S. Midwest grain belt kept boosting crop prospects, pressuring prices along with weak oil, gold and industrial metals markets.
BROAD-BASED SELLING
"It's just a broad-based commodities sell-off, they're searching for value and there's nothing that can be done about the slide right now, you just have to hold on and wait," a CBOT trader said.
CBOT corn futures for September delivery settled down 2 cents, or 0.35 percent, at $5.71-1/2 a bushel, recovering from a session low of $5.44 and off a high of $5.87.
August soybeans fell 22-1/2 cents, or 1.59 percent, to $13.94-1/4 a bushel, while September wheat WU8 was down 13-1/2 cents, or 1.69 percent, at $7.83-1/4 per bushel.
Concerns diminished over the soy crop in the Mississippi Delta where dry and hotter-than-normal weather helped futures finish higher on Tuesday.
"The weather pattern will continue to dry them (soybean fields) out," said Mike Palmerino of DTN Meteorlogix. He said it was too early to tell if weather would damage soybean yields. "It will depend on August rain this year. It might even be later because of the late planting," he said.
August is critical for soybeans, when most plants go through the pod-setting stage of development.
"Background factors are beginning to turn from bullish to at least potentially bearish, if not outright bearish," Anne Frick, oilseeds analyst for Prudential Financial, said.
"There are signs that usage is being rationed, the production outlook has improved with good weather in the U.S., and in the case of soybeans there are signs of increased plantings in late 2008 for next spring's harvest in South America," Frick said.
"Also, there are concerns on curbs in speculation in commodities so all of those things are combining to push things lower," she added.
A Reuters poll showed analysts and traders expected prices for corn and soybeans to rise by year end.
The survey of 14 grain analysts and traders projected the average spot month Chicago Board of Trade soybean futures price by the end of 2008 at $15.225 per bushel. The average estimate for the spot CBOT corn by year's end was seen at $6.754 per bushel, and spot wheat was seen at $7.982 per bushel.
(Reporting by K.T. Arasu, Sam Nelson and Michael Hirtzer in Chicago; Sybille de La Hamaide in Paris and Miyoung Kim in Seoul; Editing by David Gregorio)
