February 24, 2006

 

CBOT Corn Review on Thursday: Firm on fund buys; options trade active

 

 

Corn futures on the Chicago Board of Trade closed with modest gains after early fund selling pressured the market to its lows and fund buying subsequently surfaced to lift prices into positive territory, sources said Thursday.

 

Options trading was active ahead of the March options expiration on Friday, a trader said.

 

March corn gained 1 1/2 cents to US$2.23 and May corn added 1 1/4 cents to US$2.33 3/4 a bushel.

 

Corn futures have gone through a modest correction since reaching a US$2.27 high last Friday, and traders seem tentative to push the market too much below the US$2.20 area, said Shawn McCambridge, senior grains analyst at Prudential Financial in Chicago.

 

The choppy trade seen in Thursday's session reflected the lack of "determination" on either side of the market to push prices too far, he said. There is a fear that fund buying could enter the market at any time and catch traders on the wrong side of a big trade.

 

Recent rains in Argentina are fully factored into prices, sources said, and the moisture should help to limit further production losses. The U.S. Department of Agriculture decreased its production estimate for the country to 15.5 million tonnes in February, from 16.8 million in January, and down from last year's record of 19.5 million tonnes, due to heat and dryness in December and January.

 

Mostly dry conditions are expected in Argentina Friday through Monday. Light showers are possible in southern areas over the weekend. Temperatures are expected to turn much cooler by Thursday and Friday, with near- to below-normal readings over the weekend, weather service DTN Meteorlogix said.

 

In other news, the 2005-06 global corn production estimate is unchanged at 683 million metric tonnes, though consumption has been raised to a record high 676 million tonnes, up 1 million from its last report, the International Grains Council said Wednesday.

 

U.S. corn consumption is expected at a new high, due to increased use by the ethanol industry, taking total use to 228 million tonnes, the IGC said.

 

In export news, the Taiwan Sugar Corp. bought one cargo of 23,000 tonnes from Cargill for March 1-15 shipment from the U.S. Gulf or March 16-30 from the Pacific Northwest. TSC bought another corn cargo of 10,000 tonnes from ADM for shipment either April 11-30 from the U.S. Gulf or April 26-May 15 from the Pacific Northwest.

 

Weekly export sales will be released on Friday because of the holiday this week. Corn sales are expected to range from 900,000 tonnes to 1.2 million tonnes, traders said, compared to 1.25 million the previous week.

 

Nearby technical resistance on March corn is met at US$2.24, US$2.26, US$2.27-US$2.27 1/2 and US$2.30. Support is uncovered at US$2.19 1/2, US$2.17, US$2.16 1/2 and US$2.15. Further support is put at US$2.12 1/2.

 

ABN Amro was by far the largest buyer, taking a net 3,800 May contracts, R.J. O'Brien bought a net 300 March and 200 May, Fimat bought a net 300 Mar and 300 May, Prudential Financial bought 400 Mar, Tenco bought 400 May and 200 Mar, D.T. Trading bought 500 May and CIS bought 300 Mar.

 

USA Trading and Rosenthal each sold a net 800 Mar, Citigroup Global Markets sold 900 May and 300 July, Refco sold 500 May and 300 Mar, FCStonnee sold 500 May, Rand Financial sold 300 May and Goldenberg Hehmeyer sold 200 May.

 

Calyon spread 2,000 Mar/July at 20 cents and J.P. Morgan and FCStonnee each spread 1,000 Mar/May at 10 3/4 cents.

 

Corn options trade was active, with sales of 10,000-15,000 March US$2.15 calls ahead of the option expiry, a trader said.

 

Funds bought a net 500 corn contracts on the day.