January 13, 2006

 

CBOT Corn Review on Thursday: Weakens slightly but finishes off lows

 

 

Corn futures at the Chicago Board of Trade fell slightly Thursday on fund selling after a bearish government crop report that nudged 2005-06 production higher, raised U.S. and world ending stocks as well as quarterly stocks and trimmed U.S. exports, sources said.

 

However, prices shaved a portion of those losses near the end of the session on short covering and late speculative buying.

 

Most-active March corn settled 1 3/4 cents lower at US$2.21 3/4 and May corn was also down 1 3/4 cents at US$2.22 1/4.

 

"We opened lower ... on the increase in the ending stocks figure in the U.S. and the increase in the world ending stocks. We digested that report and really didn't generate much as far as any follow-through trade," said Shawn McCambridge, senior grains analyst at Prudential Financial in New York.

 

The U.S. Department of Agriculture raised 2005-06 U.S. production to 11.112 billion bushels and lowered exports by 50 million bushels to 1.85 billion bushels. Domestic use was raised by 125 million bushels to 8.960 billion, all of which took ending stocks higher to 2.426 billion bushels.

 

Quarterly grain stocks as of Dec. 1 were estimated at 9.813 billion bushels compared to 9.451 billion a year ago.

 

World ending stocks were raised nearly 10 million tonnes to 128.26 million tonnes.

 

"The world ending stocks were a little bit of a surprise being up that sharply, though an adjustment to the Brazilian numbers and then also an increase in Chinese production," McCambridge said.

 

After opening a small gap to the downside at the open and later trading to a three-week low of US$2.09 1/2, March corn consolidated around 3 to 4 cents lower until buying surfaced toward session's end. The contract eventually closed the gap as it pared losses.

 

The ability of March corn to hold support above the US$2.08 1/2 40-day moving average was considered positive and helped spark some of the late buying, a trader said.

 

The USDA also issued weekly export sales, pegging corn at a net 631,200 metric tonnes, up 32% from the previous week but 4% below the previous four-week average.

 

In other news, Argentina's 2005-06 corn harvest is estimated at 14 million tonnes, much less than previously expected, according to Juan Gear, president of the Argentine Corn Association, or Maizar. The record 2004-05 crop of 19.5 million tonnes was supported by a combination of favorable weather and solid prices, but this year's crop was affected by an extended drought.

 

The USDA, however, pegged Argentina's 2005-06 corn crop at 16.8 million tonnes.

 

Commodity funds sold an estimated 11,000 contracts on the CBOT.

 

CIS sold 2,000 May and 300 March, Tenco sold 1,000 March, Refco sold a net 300 March, Rosenthal sold and bought 1,000 March, R.J. O'Brien sold a net 200 March and Man Financial and Iowa Grain each sold 400 March.

 

Fimat bought 1,200 March, Goldenberg-Hehmeyer bought 1,000 March, Cargill bought 800 March and ADM and O'Connor each bought 300 March.