January 26, 2006

 

CBOT Corn Review on Wednesday: Fund buying extends recent rally

 

 

Corn futures traded at the Chicago Board of Trade settled moderately higher Wednesday, powered by fund buying for the second straight day, sources said.

 

March corn gapped higher on the opening and traded up to levels not seen since the beginning of the new year.

 

At one point in the session, March corn had rallied almost 15 cents from its low reached on Friday, with over 30,000 contracts thought to have been purchased by funds in Tuesday and Wednesday's sessions.

 

March corn rallied 3 1/4 cents to US$2.26 1/2 per bushel; May corn rose 2 3/4 cents to US$2.26; and July corn gained 3 cents at US$2.35.

 

The funds have been the dominant market movers over the past two sessions, a floor analyst said. Their position went from a small short late last week to long around 30,000 contracts, he added.

 

Wednesday's estimate of commodity fund buying was 18,000 contracts.

 

Corn futures dipped from their highs of the day in late trading when soybean futures turned weaker but held on to finish with solid gains despite the absence of fresh fundamental news.

 

Technical rallies without fundamental support usually don't last, said Shawn McCambridge, senior grain analyst with Prudential Financial in Chicago. Nothing has changed fundamentally and there is no reason to believe it will change in the short term, he noted.

 

"I don't think anyone has a lot of confidence in this rally right now," he said.

 

On technical charts, March corn gapped open higher above Tuesday's settlement and rallied to trade as high as US$2.18 1/4, its highest level since Jan. 4.

 

March corn remains above most major averages except for the 200-day moving average at US$2.28 3/4, and its 14-day Relative Strength Index now stands just over 59.

 

Buyers on Wednesday included ADM, which bought 1,000 March; Calyon Financial bought 1,000 March; JP Morgan bought 2,500 March; Fimat bought 1,000 March and 600 July; Goldenberg-Hehmeyer bought 1,000 March; Iowa Grain bought 1,500 March; Man Financial bought 2,000 March; Prudential Financial bought 1,000 March; R.J. O'Brien bought 2,400 March; and the Refco division of Man Financial bought 2,000 March.

 

Sellers Wednesday included FC Stonnee, which sold 1,000 March and 200 July; ABN Amro sold 800 March and 400 December; JP Morgan sold 1,000 March and 1,200 May; Rand sold 1,000 March; and Tenco sold 2,000 March, 1,200 May and 300 December.

 

Oat futures settled higher as fund buying more than offset commercial-related hedging, a floor trader said. The March contract gained 5 cents to US$1.95 3/4.

 

Ethanol futures ended mostly lower. The April contract did not trade and settled at US$2.40 per gallon.

 

On Thursday, the U.S. Department of Agriculture is scheduled to release the weekly export sales report for the week ended Jan. 19 at 7:30 a.m. CST (1330 GMT). Analysts estimate sales between 800,000 and 1.4 million metric tonnes.