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One more day of lower trading, analysts say

Agriculture.com Staff 07/17/2007 @ 1:02pm

Rainy forecasts encouraging crop development could drop corn futures prices to $2.90 per bushel, soybeans have already dropped $0.90 in two days, analysts say. Also, analysts are closely watching the exiting of index fund positions.

Brian Basting, Advance Trading, said the rain for parts of Iowa and the eastern Corn Belt are the leading fundamentals.

"The traders are clearly focused on weather," Basting said. "In the case of corn, we're looking at how large this crop might be."

With additional lower trading seen in the days ahead, the resolve of the commodity and index funds will be tested, Basting said.

As of Monday, the net-long positions for the funds totaled 180,000 corn contracts.

"Perhaps the more important question is whether the funds go to a net-short position. That seems like a long way away from today, but it will be tested."

The market has never dealt with the potential for a record crop and a record-long fund position, Basting said.

"With the forecasts of mild pollination weather, that is a recipe for more fund liquidation," Basting said. "The margin call liquidation potential is still quite high."

On Friday, the Chicago Board of Trade Nov 2007 soybean futures contract closed at a high of $9.47 ½ per bushel. On Tuesday, the same contract closed at $8.60.

Meanwhile, Jason Ward, North Star Commodity Investment Co., said producers wondering what about a market move should keep soybean prices of $8.45 to $8.50 in mind.

"That's good support yet," Ward said. "Because funds like to liquidate in three-day increments, we could see another down day and then a rally."

If CBOT soybean prices go down again on Wednesday, prices could get lower they were before the USDA June Acreage report. That report, calling for more acres, traded bullish, Ward said.

"The odds of getting those acres next year become difficult," Ward said.

For corn, as long the rain falls, prices will drop, said Ward. "With rain, I think you lower prices to $2.90 to $3.00," Ward said. "I think that is realistic."

Rainy forecasts encouraging crop development could drop corn futures prices to $2.90 per bushel, soybeans have already dropped $0.90 in two days, analysts say. Also, analysts are closely watching the exiting of index fund positions.

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