February 15, 2007

 

CBOT Corn Review on Wednesday: Retreat on technical sales and wheat weakness

 

 

Chicago Board of Trade corn futures ended lower across the board Wednesday, backpedaling from earlier gains on technical sales and spillover weakness from wheat.

 

March corn ended 2 3/4 cents lower at US$4.08 1/4 per bushel, and December finished 1 3/4-cent lower at US$4.01 1/4.

 

The market turned into a follower of wheat after early price strength failed to generate follow through momentum, said a CBOT floor analyst.

 

The wheat/corn ratio was a little out of whack and needed to correct, he added.

 

Tuesday's advances and Wednesday's gains were light volume rallies, opening the door for prices to ease back of any sign of upside exhaustion, traders added.

 

Meanwhile, the market lacked any fresh supportive news, with the U.S. Department of Agriculture's 10-year baseline projections failing to provide any surprises to jolt the market, analysts said.

 

Otherwise, activity was relatively light until technical selling uncovered pre-placed sell orders to drop futures into negative territory for the rest of the day. Early price strength was tied to follow through buying from Tuesday, with long term supportive fundamental outlooks providing strength to lift new crop months to new highs, traders said.

 

Nevertheless, traders say futures are seemingly poised to continue in a choppy range until the market has a clear signal on where 2007 acreage will end up.

 

The U.S. Department of Agriculture forecast in its 10-year baseline projections an increase in rice plantings for 2007 up to 86.0 million acres. The figure compares to 2006's acreage of 78.6 million. USDA sees a steady increase in usage for ethanol over next few years. Corn usage for ethanol is forecast at 3.2 billion bushels in 2007, rising to 4.00 billion in 2010. USDA forecasts a decrease in the level of ending stocks before levels rebound in the 2010-2011 crop year. 2007-08 ending stocks are forecast at 660 million bushels, down from 2006-07 ending stocks of 935 million.

 

On tap Thursday, USDA is scheduled to release its weekly export sales report at 8:30 a.m. EST. Analysts anticipate export commitments in a range of 700,000 to 1 million metric tonnes.

 

Meanwhile, the DTN Meteorlogix Weather forecast said from the Mississippi River through Ohio will face numerous transportation delays for livestock and grain as a result of the winter storm conditions this week. However, drier weather is expected in Illinois, Indiana and Ohio during the last half of this week.

 

In pit trades, ADM Investor Services bought 700 March, Rand Financial bought 500 December, and Rosenthal bought 300 December.

 

FCStonnee sold 600 December, Fortis sold 300 March and 700 July, UBS Securities sold 500 March and JP Morgan sold 300 December. Speculative fund selling was estimated near 4,000 contracts.

 

Day session volume on the e-CBOT platform was 142,616 contracts.

 

CBOT oat futures ended lower, retreating in unison with declines in other grains. The activity briefly reversed the recent trend of fund selling in nearby contracts and buying in new crop months. March oats closed 1 1/4-cent lower at US$2.40 3/4 per bushel and December ended 3 cents lower at US$2.48 3/4.

 

Ethanol futures ended steady, with the March contract settling unchanged at US$2.045, and the April contract settling unchanged at US$2.000.