January 7, 2010

 

CBOT Corn Review on Wednesday: Higher on crude, wheat, fund-buying

 

 

Strong crude oil and fund-buying helped push Chicago Board of Trade corn futures higher Wednesday.

 

March corn ended up 3 cents at US$4.21 3/4 per bushel and May corn ended up 3 cents at US$4.32.

 

The market traded on both sides of unchanged during the session but strengthened late in the day, thanks in part to a retreat in the dollar, analysts said.

 

Gains in crude oil were supportive, as was a rally in wheat, traders said. Also supportive is harsh winter weather that will increase feed demand, traders said.

 

Funds bought an estimated 6,000 contracts.

 

Much-awaited index fund rebalancing was present in the wheat market, which surged, but not yet in corn, said Mike Zuzolo, president of Global Commodity Analytics and Consulting. He added that trends in equities, the dollar and crude are "suggesting to the grain trade that risk-taking is back in fashion," which would be supportive going forward.

 

Traders are cautious ahead of the U.S. Department of Agriculture's production and stocks reports, which carry more uncertainty because of the delayed harvest. The reports will be released Jan. 12.

 

"As far as I'm concerned it's all going to be a shell game," says Sid Love, analyst with Kropf and Love Consulting. "It's all going to depend on production, and we won't know that until spring."

 

Zuzolo said that index fund rebalancing, expected to start next week, might pick up just as the USDA report approaches. A bullish report, coupled with the index fund buying, could spark gains and push prices beyond recent resistance above US$4.25, he said.

 

In other news, private analytical firm Informa Economics on Wednesday raised its estimated 2009 corn production in China and Argentina, traders said.

 

The firm pegged China's corn crop at 160 million metric tonnes, up 5 million tonnes from its December estimate, due to projections from China's Ministry of Agriculture.

 

Argentina's 2009 production was pegged at 15.5 million metric tonnes, up 2.5 million tonnes from the previous month, due to more planted acreage than previously assumed.

 

Also, Monsanto (MON) sees 2010 U.S. corn area at 88 million acres and soy area at 75 million acres, the company said in its first-quarter conference call.

 

That compares to 2009's planted acreage of 86.4 million for corn and 77.5 million for soy. The estimates are slightly below some early ideas floating around the grain markets of 89.5 million for corn and 77 million for beans.

 

CBOT oats futures ended higher. March oats ended up 3 cents at US$2.77 per bushel and May oats ended up 3 cents at US$2.85 1/4.