Written by Sumit Roy  |

June 26, 2012

Market Wrap: Corn Surge Continues As Hot Weather Damages Crop, NatGas Rises Up Against $2.75 Resistance

Details

Corn and natural gas rise, while gold and silver fall.

With little in the way of news flow to guide prices, commodities traded in trendless fashion, ending mixed on the session. Economic concerns around the globe remain the theme in financial markets, with attention now focused on a two-day EU summit on Thursday and Friday, where officials will discuss the debt crisis in the eurozone.

However, hopes aren't very high that the summit—the 20th such time leaders have met to discuss the crisis—will produce anything substantive. Spanish and Italian 10-year bond yields were last trading up 24 basis points and 17 basis points, respectively, to 6.87 percent and 6.18 percent.

The U.S. Dollar Index was last trading at 82.43, a loss of 0.08 percent.

• Gold and silver fell, as the duo continued to trade in a narrow range. The yellow metal was last trading down by $11.26, or 0.71 percent, to $1573.22/oz, while silver shed $0.44, or 1.59 percent, to $27.09.
  
  Platinum fell by $0.44, or 1.59 percent, to $1426.95 and palladium dropped $13.15, or 2.16 percent, to $595.10.
  
  "Gold is capped on the upside by disappointment post-Fed, while on the downside, we have some bargain hunting, and a bit of physical buying into the troughs," Societe Generale analyst Robin Bhar said. "We are stuck in a fairly small range here, in the 1570-1600 area, certainly until the weekend when we will get to hear more on how the euro zone will be [tackled]."
  
  
• Crude oil prices were mixed, as Brent rose by $1.20, or 1.32 percent, to $92.21, while WTI lost $0.21, or 0.27 percent, to $79. Despite today's widening of the spread between Brent and WTI, Dennis Gartman sees the gap closing in the future.
  
  "This we think is the time then to sell Brent and buy WTI, having watched as the spread has been narrowing almost relentlessly and still likely to make its way toward parity, if not beyond, remembering that Brent sold for many years at a $1- to-$2-a-barrel discount to WTI," wrote Gartman.
  
  
• Natural gas rose by $0.05, or 1.67 percent, to $2.74/mmbtu. A crippling heat wave is forecast over the United States during the next two weeks, but it remains to be seen whether it will be enough to spur gas above the formidable $2.75 resistance level.
  
  "We have warmer-than-normal temperatures forecast for the full continent east of the Rockies in the six- to 10-day and 11- to 15-day forecast, which will mean higher power loads and natural gas consumption," said Tim Evans, energy analyst at Citi Futures Perspective.
  
  
• Corn continued higher today after surging in the prior session amid concerns that hot, dry weather in the growing regions of the U.S. will damage the crop. The USDA corroborated the market's fears in its latest Crop Progress Report.
  
  The department rated only 56 percent of the corn crop as good to excellent and 53 percent of the soybeans crop as good to excellent. The corn crop is at its poorest condition in 24 years, according to Reuters, and may deteriorate further without rain.
  
  Corn was last trading up by $0.08, or 1.23 percent, to $6.29/bushel, while soybeans fell by $0.13, or 0.89 percent, to $14.69 amid profit-taking, and wheat fell by $0.02, or 0.21 percent, to $7.23.
  
  
• Copper was last trading at $3.31/lb, a loss of $0.01, or 0.23 percent, on Comex.
  
  "Given their cyclical nature, industrial metals have suffered from the deterioration of leading economic indicators," Credit Suisse said.
  
  "However, the sector remains a mixed bag. With the exception of tin, all markets are undervalued. The larger markets—copper and to a lesser extent aluminum—have better supply-demand balances and look healthier from a technical point of view, making them our preferred picks."