January 3, 2008

 

CBOT Corn Review on Wednesday: Rallies to 12-year highs on speculative buying

 

 

Chicago Board of Trade corn futures ended moderately higher Wednesday with spot-month March making another new life-of-contract high and trading at levels not seen since the summer of 1996.

 

March corn settled 7 cents higher at US$4.62 1/2 per bushel.

 

Speculative buying and a large rally in soybean futures provided support for the upside gains. Soybean futures set another 34-year high Wednesday, with the March contract ending at US$12.48 3/4, 34 1/2 cents higher.

 

The strong rally in soybean futures encouraged speculative buying in corn, said Brian Hoops, president of Midwest Market Solutions in Yanktonne, S.D. Corn prices need to keep pace with soybean prices in order to encourage farmers to plant corn this spring and the gains in soybeans translated into stronger corn prices, said Hoops.

 

Dry weather forecasts for Argentina's corn-growing regions also provided support with traders adding risk premium to the market, an e-cbot trader said. Argentina is a major exporter of corn.

 

A rally in crude oil futures with the nearby contract reaching US$100 per barrel added to the strength, with corn supported by its ethanol component, the e-cbot trader said.

 

Nearby crude oil closed up US$3.58 on the day. Large advances in precious metals and a weaker dollar added to the upward trend, a commission house analyst said. Nearby gold futures ended more than US$20 per ounce higher, and nearby silver futures ended up more than 35 cents per ounce.

 

"The early theme of 2008 is to buy commodities," a commission house analyst said. Corn ending stocks are almost twice as large as last year at this time but "it's all about the money flow," a commission house analyst said.

 

The absence of additional speculative buying helped lead to profit taking near the close, as did ideas of increased farmer selling in the new year, a trader said.

 

Commodity fund buying was estimated at 8,000 contracts.

 

On daily technical charts, electronically traded March corn remained above its major moving averages and the 14-day relative strength index in March was 80.06.

 

In options trading, MF Global bought 2,000 March US$4.50 calls and 2,000 US$4.50 puts. RJ O'Brien sold 1,000 February US$4.60 calls.

 

Oat futures settled higher, making new-life-of-contract highs in most months as spillover strength from the rest of the grains and light fund buying supported prices in quiet trade, an analyst said.

 

March oats ended 5 1/4 cents higher at US$3.12 per bushel, after trading as high as US$3.14 3/4.

 

Ethanol futures finished higher, supported by the rally in crude oil, an analyst said. January ethanol gained 5.2 cents to US$2.42 per gallon while February rose 8.9 cents to US$2.309.