February 24, 2007

 

CBOT Corn Review on Friday: Ends lower; corrects from prior gains

 

 

Chicago Board of Trade corn futures ended lower across the board Friday, correcting from recent advances amid overbought conditions and the absence of aggressive speculative fund buying.

 

March corn ended 4 1/4 cents lower at US$4.30 1/4 per bushel, May corn settled 5 cents lower at US$4.42 1/2, and December finished 7 cents lower at US$4.20 3/4.

 

The market arbitrarily had a correction from prior gains, with overbought conditions, end of the week profit taking, a drop off in export sales and an acreage survey from Doane Advisory Services all possible reasons leading up to the setback, said John Kleist, senior analyst with Top Third Ag Marketing In Chicago.

 

The general logic dictated the market was overbought, but when it chooses to correct is arbitrary, and today was the day, Kleist added.

 

Traders said the absence of aggressive fund buying that underpinned futures in prior sessions was a key component in the market's declines. Otherwise, activity was light, with grinding down without a significant buying presence.

 

The pullback of a few cents does not signal a change in market opinion, particularly after recent gains, and there is no evidence of top being in place in the market, said Kleist. The funds took care of what had to do earlier in the week and took a breather Friday, Kleist added.

 

The U.S. Department of Agriculture said net weekly export sales for 2006-07 corn totaled 839,400 tonnes, down 39% from the prior week and 18% under the prior 4-week average. Trade estimates called for commitments in the 800,000 to 1,100,000 tonne range. According to a Doane Advisory Services survey, farmers intend to plant 14.7% more corn in 2007 than was seeded the previous year. If the survey results are extrapolated to national estimates, Doane said total U.S. corn acreage would climb to 89.8 million acres, up from 78.3 million in 2006.

 

Meanwhile, the DTN Meteorlogix Weather forecast said a big winter storm system will move across the central U.S. this weekend, with a mix of rain, ice and snow, and varying effects on agriculture. The storm system will produce up to 12 inches in central and northern Iowa, southern Minnesota, Wisconsin and northern Illinois. Snowfall in the remainder of the central Plains and western Midwest will vary, from 3 inches in southwest Kansas to 8 inches in eastern Nebraska, western Iowa, and southeastern South Dakota. The storm system will also be a thunderstorm-maker over the eastern Midwest.

 

In pit trades, JP Morgan bought 1,700 December, Man Financial bought 900 March, Fimat bought 600 may and 500 July, and Citigroup bought 400 March and 400 December.

 

On the sell side, Citigroup sold 1,000 December, JP Morgan sold 700 December, FCStonnee sold 500 May, Man Financial sold 400 March, and Rand Financial sold 300 May. Speculative fund selling was estimated at 2,000 contracts.

 

Day session volume on the e-CBOT platform was 138,829 contracts.

 

CBOT oat futures ended lower, backpedaling from recent gains in consolidative action. Spillover pressure from neighboring grains helped set the tonnee for prices throughout the day. March oats closed 6 1/2 cents lower at US$2.50 1/2 per bushel and December ended 2 1/2 cents lower at US$2.49 1/2.

 

Ethanol futures ended lower Friday, with the March contract settling 0.023 lower at US$2.140, and the April contract settling 0.012 lower at US$2.098.