Corn futures settle below $5/bushel in Chicago

08 August 2008 22:15  [Source: ICIS news]

HOUSTON (ICIS news)--Corn futures for September delivery settled beneath $5/bushel for the first time in months on Friday, in a sign of easing pressure on US ethanol margins.

Feedstock costs have soared with the grain, which competes on a cost-basis with Brazilian ethanol derived from cheaper sugarcane.

On 6 August, the price of Brazilian ethanol for export to Europe FOB (free on board) Santos was $2.16-2.23/gal compared with US spot anhydrous at New York Harbor priced at $2.29-2.32/gal (FOB).

Until the Friday's session, corn futures for September delivery had not settled below $5/bushel (€3.25/bushel) since February, according to data from the Chicago Board of Trade (CBOT).

Corn is the leading feedstock for US ethanol, and widescale planting of the crop has helped spur wider use of fertilizers made from chemicals such as ammonia, urea and phosphates.

Analyst Don Roose of Iowa-based US Commodities Inc, said a “perfect storm” had surrounded corn futures prices and that the grain’s current levels were still high compared with historic seasonal norms.

“It’s centred around the fact the dollar is moving higher, causing crude oil to go down. That’s causing commodity liquidation in general, and at the same time the crop conditions continue to improve,” Roose said.

Another factor, Roose said, was market sentiment that the 12 August US Department of Agriculture (USDA) might contain better-than-expected production figures.

“The bottom is a moving target, that’s the trouble. Historically these are still very, very high numbers,” Roose said.

($1 = €0.65)

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By: David Rosen
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