January 10, 2007

 

CBOT Corn Review on Tuesday: Settles lower on CFTC news, speculative selling

 

 

Chicago Board of Trade corn futures settled lower Tuesday and near their lows of the session after Monday's Commodity Futures Trading Commission commitment of traders report revealed larger-than-expected index fund long positions, sources said.

 

March corn dropped 9 cents to US$3.54 1/2 per bushel and May corn fell 8 3/4 cents to US$3.64 1/2. The e-CBOT day session volume in March was 95,217 contracts.

 

The CFTC released a supplemental commitment of traders' report showing commodity index funds net long 421,579 futures and options on futures contracts as of last Wednesday, higher than the trade expected, sources said.

 

The market is concerned about the long positions held by the index funds, said John Kleist, senior analyst at Top Third Ag Marketing in Chicago. Until the index funds have addressed rebalancing, this issue "will remain a thorn in the bull's side," he said.

 

Corn continued its recent liquidation as the index fund issue led to speculative selling, a floor trader said.

 

March corn reached new lows late in the session but was unable to trade below US$3.54, the upper limit on an upside price gap created in early November.

 

Continued weakness in energy futures also limited the upside with the lack of fresh fundamental inputs also a factor, sources added.

 

After the recent price weakness, corn could see some squaring up of positions in the next several days leading up Friday's U.S. Department of Agriculture reports, said Kleist.

 

In a Dow Jones Newswire survey, the average corn production estimate of eighteen analysts was 10.706 billion, 39 million lower than the USDA's estimate of 10.745 billion in November.

 

The average corn yield per acre was 150.8 bushels per acre, slightly lower than the 151.2 estimated in November.

 

The average of 12 analysts polled estimate Dec. 1 quarterly corn stocks at 9.107 billion bushels versus Dec. 2006 estimate of 9.815 billion.

 

The average of 15 analysts surveyed peg corn ending stocks at 893 million bushels, 42 million less than the 935 million estimated in December and far below the 1.971 billion for the 2005-06 crop.

 

On open auction technical charts, March corn gapped open lower but held at the upper end of an upside gap created in early November. The 14-day relative strength index in March is 37.50.

 

Buyers Tuesday included Rand, which bought 2,000 March and 1,000 July; JP Morgan, which bought 1,200 March; and UBS, which bought 800 March.

 

Citigroup sold 2,000 December, Fimat sold 800 March, Iowa sold 700 March and Fortis sold 500 March and 500 July.

 

Commodity fund selling was estimated at 6,000 contracts.

 

In spread trading, JP Morgan bought 2,000 March-May and RJ O'Brien bought 1,500 July-March.

 

In options trading, Man Financial bought 1,300 March US$3.80 calls.

 

Oat futures settled lower as "everything is on the defensive and oats are following," a commission house analyst said. Technical weakness, with March oats filling an upside price gap created last fall, also added to the losses, he said.

 

March oats fell 8 1/2 cents to US$2.52 1/4 per bushel and May declined 8 3/4 cents to US$2.59 1/2.

 

Ethanol futures ended lower in light trade. The February contract fell 8 cents to US$2.169 per gallon, and the March contract declined 5.3 cents to US$2.05.