March 2, 2007

 

CBOT Corn Review on Thursday: Down on speculative sales, but well off lows

 

 

Chicago Board of Trade corn futures ended lower Thursday, but well off session lows as late short covering and end-user buying helped trim earlier declines.

 

March corn ended 8 cents lower at US$4.17 1/4 per bushel, May corn settled 7 1/2 cents lower at US$4.28, and December finished 6 3/4 cents lower at US$4.13 1/4.

 

The market was pressured by speculative fund liquidation for most of the day, with prices blowing through pre-placed sell-stop orders, before finding its footing to finish well above support at the low end of a nearly two-month trading range, said Jack Scoville, analyst with Price Futures Group in Chicago.

 

Speculative liquidation was the theme, with early weakness in world equity markets, a lack of any surprises from the outlook conference and disappointing weekly export sales setting the stage for the declines, traders said.

 

This was consistent, with selling accelerating once futures penetrated near-term support levels. However, as the day unfolded, the combination of stabilizing activity in equity markets and underlying end-user buying surfaced to encourage end-of-day speculative short covering heading down the stretch, traders said.

 

Nevertheless, the underlying theme of the market remains bullish, with uncertainties related to spring plantings and long-range demand seen limiting downside, said Scoville. The market was down, but continues to hold above support levels from mid January, Scoville added.

 

The U.S. Department of Agriculture expects U.S. farmers to plant 87 million acres of corn in 2007 and produce 12.2 billion bushels of the grain, the department's chief economist, Keith Collins, said Thursday at the annual Agricultural Outlook Forum. The acreage and production estimates are up from the USDA's baseline projections, which were released on Feb. 14. In the baseline projections, the USDA had estimated 2007-08 corn area at 86 million acres and production at 12.065 billion bushels.

 

USDA said net weekly export sales for corn were 356,600 metric tonnes. 2006-07 sales totaled 318,000 tonnes, a marketing-year low. The sales were down 61% from the prior week and 68% under the prior four-week average. Trade estimates called for commitments in the 600,000- to 800,000-tonne range.

 

Meanwhile, the DTN Meteorlogix Weather forecast said the cold and wet weather in the Midwest heading into March offers the potential for delaying progress in spring field work. The target area of concern is the Ohio Valley and the northern Mississippi Delta. This area is now classified as in very moist to "extremely moist soil-moisture conditions by the latest Palmer Drought Index. The prospect of La Nina conditions in the Pacific developing this spring and summer, bringing a heightened potential for hot midsummer weather, offer a note of urgency for timely planting of corn this spring, Meteorlogix reports.

 

In pit trades, JP Morgan bought 700 March and 1,500 December, Tenco bought 800 March and 1,000 May, and UBS Securities bought 800 March and 500 December.

 

On the sell side, UBS Securities sold 6,000 July, Penson GHCO sold 2,000 May, Citigroup sold 1,000 May, ADM Investor Services sold 800 December, Fimat sold 800 May and 500 December, and Man Financial sold 700 May. Speculative fund selling was estimated near 18,000 contracts.

 

Day session volume on the e-CBOT platform was 168,737 contracts.

 

CBOT oat futures ended lower across the board, with speculative fund liquidation weighing on prices over the course of the day. However, the new crop December futures ended at session highs, with late commercial buying surfacing to trim declines, traders said. May oats closed 9 3/4 cents lower at US$2.49 1/2 per bushel and December ended 3 cents lower at US$2.47.

 

Ethanol futures ended higher, with the March contract settling 0.022 higher at US$2.280, and the April contract settling 0.010 higher at US$2.210.