From the October 01, 2009 issue of Futures Magazine • Subscribe!

Corn futures slammed

Corn was slammed at the beginning of September, and the outlook is bearish through the end of the year.

“If we can avoid frost, it looks like we will have a tremendous crop. If we do get a frost, it should help futures rally. We’ve got no risk premium in this market whatsoever,” says John Sanow, analyst for DTN. Sanow says futures spreads show bearish underlying fundamentals, an indication that commercial traders aren’t concerned one way or the other unless there is a major widespread frost. Sanow expects corn to trade in a sideways range.

Joe Victor, vice president at Allendale, says U.S. economic growth and a healing global economy would help create better demand for corn. “Once we get about 10% or 25% of the harvest, we’re going to start transitioning away from the production phase and the market’s going to be very sensitive going into the demand phase,” he says. Victor expects pre-harvest lows for the December futures to be at $2.85-$2.90 per bushel.

“The weakness in the U.S. dollar is helping to support prices, but we believe the market longer-term is headed lower and could be headed a lot lower [because] there’s no shortage of corn,” says Richard Brock, president of Brock Associates. Brock expects the market to make its annual low before the end of October and says December futures could be as low as $2.75 per bushel.

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