February 28, 2007

 

CBOT Corn Review on Tuesday: Posts sharp declines on speculative liquidation

 

 

Chicago Board of Trade corn futures tumbled lower Tuesday, back pedaling on speculative selling amid worries over economic growth in China and technical liquidation.

 

March corn ended 14 1/2 cents lower at US$4.11 per bushel, May corn settled 14 1/4 cents lower at US$4.24 1/4, and December finished 8 1/2 cents lower at US$4.09 1/2.

 

The market took on a defensive posture from the outset, dropping more than 3% on the day, with carryover selling from Monday's poor technical close and broad based early commodity weakness enticing speculative funds into liquidating some positions, analysts said.

 

End-of-the-month profit taking and pre-first notice day positioning were features as well, as the market fell into a tailspin after the early drop uncovered pre-placed sell orders, analysts added.

 

The theme was consistent throughout the day with the presence of speculative sales remaining an undermining feature to keep prices firmly planted in negative territory. Worries that a slow down in China growth could lead to further selling pressure in commodities kept buyers on the run, analysts said.

 

A recovery in crude oil futures did take some of the bite out of the defensive tonnee, but in the absence of fresh news, futures were unable to attract any aggressive buyers.

 

Otherwise, futures had little directives to influence direction, but lingering worries over a potentially wet spring hampering corn plantings did provide some underlying stability for prices, a trader said.

 

Meanwhile, analysts said weakening cash basis levels coinciding with ample cash corn stocks in the pipeline short term is seen producing moderate to large deliveries against March corn futures. First notice day for the March future is Wednesday. Analysts expect deliveries against the CBOT March corn contract to fall in a range of zero to upwards of 1,500 lots, with many analysts leaning toward a figure in the 500- to 1,000-lot range.

 

The DTN Meteorlogix Weather forecast said the U.S. Midwest has a new round of rain, ice and snow moving into the region during Wednesday and Thursday. Snowfall of up to eight inches is in store for the northern Midwest - northern Iowa, Minnesota, and Wisconsin. Total liquid precipitation will range from one-quarter to one inch.

 

The main impact from this new round of winter weather will be further transportation delays due to snowy and icy road conditions. Indications from the country are that the early-February Arctic cold wave resulted in well-frozen soils, and that little, if any, of the recently arrived moisture will percolate into the soil profile, but will rather be lost to rivers and streams via runoff, Meteorlogix reports.

 

In pit trades, JP Morgan bought 1,000 May and 1,000 July, Penson GHCO bought 1,200 May and 1,000 December, Fimat bought 500 March and 500 May, and RJ O'Brien bought 500 May.

 

On the sell side, Tenco sold 500 May and 1,000 December, Man Financial sold 400 May and 2,000 December, UBS Securities sold 1,000 May, Kottke sold 2,500 May, 2,000 July and 500 December, Fimat sold 600 May, and Fortis sold 700 May. Speculative fund selling was estimated at 16,000 contracts.

 

Day session volume on the e-CBOT platform was 195,625 contracts.

 

CBOT oat futures ended lower across the board, stumbling in unison with other grain futures. Broad based commodity weakness weighed on prices, with speculative selling keeping futures on the defensive. May oats closed 4 cents lower at US$2.56 per bushel and December ended 4 cents lower at US$2.48.

 

Ethanol futures ended higher, with the March contract settling 0.060 higher at US$2.260, and the April contract settling 0.030 higher at US$2.180.