February 7, 2006

 

CBOT Corn Review on Monday: Ends down on technical correction

 

 

Corn futures on the Chicago Board of Trade ended lower across the board Monday, in a light technical correction from overbought market conditions, traders said.

 

CBOT March corn finished 2 1/2 cents lower at US$2.22 3/4, and May ended 2 cents lower at US$2.33 per bushel.

 

The loss of fund buying after the market met an upside technical objective of filling a chart gap left from September up to US$2.27 per bushel in early action attracted profit taking to drift prices down to nearby support, said John Kleist, analyst with Kleist Ag Consulting.

 

The market effectively unwound overbought conditions, with traders taking the opportunity to position themselves ahead of Thursday's U.S. Department of Agriculture supply and demand report.

 

The relative strength index for March futures on Friday's close was at 73.14. A RSI reading above 70.00 is considered overbought. Monday's action dropped the RSI reading for March down to 65.05.

 

Activity was fairly subdued after the initial wave of trading, with session highs and lows in place within the first fifteen minutes of trade. Local selling was a feature in the absence of aggressive speculative trade, floor sources said.

 

The loss of upside technical momentum in the market attracted fresh selling pressure, as futures remained vulnerable to the fundamental facts of the market.

 

Improved crop conditions in South America and reports of heavy cash movement following Friday's price spike to 5-month highs applied light pressure to add to defensive theme, traders said.

 

This was consistent for most the day, with futures quietly grinding lower into the close.

 

The USDA reported U.S. export inspections for corn at 38.519 million bushels for the week ended Feb. 2, at the high end of analyst's expectations of 32 million to 38 million bushels.

 

Meanwhile, CBOT corn futures posted record open interest Friday, surpassing the 1,000,000 contract threshold. Open interest in CBOT corn futures totaled 1,041,843 lots, eclipsing the previous record of 997,522 lots set on Feb. 2. Daily corn open interest jumped 44,321 lots in Friday's session, based on volume and open interest data from CBOT.

 

In pit trades, Cargill bought 1,000 March, 500 July and 700 December, ABN Amro, Calyon Financial, Prudential Financial and UBS securities each bought 500 March, Citigroup bought 500 May, Rand Financial bought 800 July, and Refco division of Man Financial bought 600 March, 400 May and 300 July.

 

On the sell side, Calyon Financial sold 300 March, JP Morgan sold 1,500 May, Citigroup sold 1,500 March, Refco division of Man Financial sold 500 March and Tenco sold 700 March. Commodity fund selling estimated between 2,000 and 3,000 lots.

 

Ethanol futures ended steady to firm, with the March future settling unchanged at US$2.53 per gallon.

 

Oat futures ended mostly higher. CBOT March oat futures settled 1/4 cent lower at US$2.01 3/4 and May oats ended 2 3/4 cents higher at US$2.00 1/2 per bushel.