January 9, 2007

 

CBOT Corn Outlook on Tuesday: Called 4-6 cents lower on e-CBOT, CFTC reports

 

 

Chicago Board of Trade corn futures are predicted to begin trading 4-to-6 cents lower Tuesday, following the weakness in overnight electronic trading and the release of the Commodity Futures Trading Commission's supplemental commitment of traders' report which revealed a larger than expected long position held by index fund participants, sources said.

 

In overnight e-CBOT trading, March corn declined 5 3/4 cents to US$3.57 3/4 per bushel and May also fell 5 3/4 cents to US$3.67 1/2. e-CBOT volume in March was 13,793 contracts.

 

The market should start out weaker on the news that from the Commodity Futures Trading Commission that the index funds are longer than what the market was expecting, a floor trader said.

 

The CFTC's supplemental commitment of traders' report, which started reporting the positions of commodity index funds as of Jan. 3, revealed that index funds were the largest net-long position holders of CBOT corn futures and options. The CFTC reported index funds were net long 421,579 contracts.

 

In the same period, large commercial traders reduced their short corn futures and options positions by 23,451 contracts and increased their long positions by 912 contracts and are now net short 566,561 contracts.

 

Large speculative traders reduced their long futures and options on futures positions by 14,715 contracts and trimmed their short positions by 2,189 contracts and are now net long 247,646 contracts, the CFTC said.

 

"Everyone knew the index funds were long but they are longer than people expected," a floor analyst said.

 

The larger than expected index fund investment was a bearish surprise and should produce a gap open lower on daily technical charts, said Brian Hoops, president of Midwest Market Solutions in a note to clients Tuesday morning.

 

On day session open auction technical charts, the bulls are fading quickly as prices have dropped below the late-December low, and at least temporarily negate the uptrend in prices that had been in place since September, a technical analyst said. There is a possibility of a double-top reversal forming in corn, he added.

 

The bulls' next upside price objective is filling the downside price gap created on the daily chart last week, pushing prices above US$3.87 1/2, while the bears' next near-term downside price objective remains closing prices below support at US$3.47 1/2, the bottom of the upside price gap created back in November, the analyst said.

 

First resistance for March corn is seen at Monday's high of US$3.66 1/2 and then at US$3.70. First support is seen at US$3.61 1/4 and then at US$3.59.

 

Cash corn basis bids were mixed Tuesday. Central Illinois was unchanged at 4 cents under March.

 

In other corn news, the Seoul branch of the Korea Feed Association bought 20,000 metric tonnes of U.S. corn from Bunge, a trader in Seoul said.

 

Corn futures prides on China's Dalian Commodities Exchange settled lower, following the weakness in prices at the CBOT, sources said. The most active September contract fell RMB/12 to settle at RMB1,670/tonne.