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Corn slips on demand doubts grow

10/14/2010 @ 3:21pm

U.S. corn futures fell Thursday as concern grew over possible declines in demand if prices remain strong.

Corn for December delivery, the most-active contract, settled down 2 cents, or 0.4%, at $5.67 1/4 a bushel at the Chicago Board of Trade. The contract had risen as high as $5.79 3/4 a bushel in earlier trading before a posting decline.

Corn futures have been climbing since mid-July, topped off by a recent surge following a deep cut last week by the federal government in its estimates for the fall corn harvest. Futures started to pull back Wednesday, dropping for the first time in four trading days after reaching their highest level in more than two years.

"When you get at these high levels, we see a lack of end-user buying and we see a lack of any new fund buying," said Don Roose, president of U.S. Commodities, an Iowa brokerage firm.

Driving concerns about an ebb in demand was the possibility South Korea, a large corn importer, may cut back on grain purchases, said Dale Durchholz, analyst for AgriVisor, an agricultural marketing service in Illinois. South Korea's largest feed miller bought corn for delivery in March but passed on a tender to import feed wheat, according trading executives.

Many analysts have projected front-month December corn will reach $6 a bushel on supply worries and strong demand. Contracts for delivery further in the future reached that price, but the December contract topped out at $5.88 a bushel Wednesday.

"People are looking at this market and seeing it starting to struggle and thinking maybe we'd better book some of these profits," Durchholz said.

Futures still have the ability to extend recent gains because the size of the crop is unknown. Yet market participants "probably have to digest what we've done so far" before making another strong push higher, Roose said.

On Friday, traders will review weekly export sales data from the U.S. Department of Agriculture for an update on demand. Corn sales for the week ended Oct. 7 are expected to be large at 1.4 million to 2 million metric tons. If USDA reports large sales and prices weaken, the market will struggle to extend the rally, Roose said.

Commodity funds sold an estimated 6,000 contracts Thursday, a moderate amount. They were heavy buyers during the recent run-up in prices.

In other markets, ethanol futures settled higher, inching up in an attempt to hold onto margins in the face of the recent rally in corn, analysts said. November ethanol ended 1 cent, or 0.5%, higher at $2.209 a gallon.

CBOT oat futures ended lower, declining in other grains. December oats settled 4 cents, or 1.1%, lower at $3.76.

-By Tom Polansek, Dow Jones Newswires; 312-341-5780; tom.polansek@dowjones.com
(END) Dow Jones Newswires
October 14, 2010 16:06 ET (20:06 GMT)
Copyright (c) 2010 Dow Jones & Company, Inc.

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