January 4, 2007

 

CBOT Corn Review on Wednesday: Ends near limit down on commodity weakness

 

 

Chicago Board of Trade corn futures settled sharply lower Wednesday, near its limit down price levels and at 2-week lows as a commodity-wide sell off pushed prices lower, sources said.

 

March corn settled 19 3/4 cents lower at US$3.70 1/2 per bushel and May corn dropped 18 1/2 cents to 3.80. e-CBOT day session volume in March was 86,009 contracts.

 

The two biggest factors were the recent weather and fund selling in corn, said Vic Lespinasse of AG Edwards & Sons.

 

The recent moisture the U.S. received has helped the winter wheat crop in the central Plains, and the weather in South America is bearish for prices as well, he noted.

 

Wheat futures traded sharply lower overnight and extended those losses in day session activity with March wheat falling 24 1/2 cents to US$4.76 1/2.

 

Commodity fund selling was estimated at 7,000 contracts.

 

Technical selling also added pressure with futures gapping open lower on open auction technical charts and settling below its 40-day moving average for the first time since mid-September.

 

Settling below the 40-day moving average is not a positive development for corn prices, a commission house analyst noted.

 

Sharply lower crude oil and metals futures also contributed to the weakness, floor sources noted. When corn closed, crude oil was more than US$2 per barrel lower on the day.

 

Talk that commodity index funds will rebalance their indices next week, reducing the percentage of grains in the mix also added to the lack of buying interest, a commission house analyst said.

 

On open auction technical charts, March corn settled at its lowest level since Dec. 18 and below its 10-day, 20-day, and 40-day moving averages.

 

Buyers Wednesday included Man Financial, which bought 1,500 December, Rand Financial, which bought 500 March and 1,500 July, Prudential which bought 800 July and RJ O'Brien, which bought 600 December and 500 March.

 

Fimat sold 3,000 March and 700 December, ADM sold 1,000 March, RJ O'Brien sold 2,000 March, and Fortis sold 1,000 March.

 

In spread trading, JP Morgan bought 2,300 Mar.-May.

 

In options trading, Prudential bought 2,500 Dec. US$2.90 puts and sold 500 Dec. US$3.40 puts.

 

Oat futures settled at lower levels as early fund and commission house buying evaporated and speculative selling and spillover weakness from the rest of the floor pressured prices, floor sources said. It looks like a change of ownership is occurring in oats from the speculators to the commercials, a floor analyst added.

 

March oats fell 9 cents to US$2.62 per bushel and May declined 8 cents to US$2.69.

 

Ethanol futures settled mixed in thin activity. The January contract ended .003 cents lower at US$2.490 per gallon. The February contract gained 6.5 cents to US$2.36.