March 3, 2007

 

CBOT Corn Review on Friday: Ends lower on speculative long liquidation

 

 

Chicago Board of Trade corn futures ended lower Friday, pressured by speculative fund selling once again, as the market remains vulnerable to volatility in outside markets and downside technical momentum.

 

March corn ended 6 1/4 cents lower at US$4.11 per bushel, May corn settled 7 cents lower at US$4.21, and December finished 6 1/2 cents lower at US$4.06 3/4.

 

The market was trading money flow, with the absence of a fresh fundamental influence leaving traders to take a cautious approach amid worries of speculative long liquidation, said Shawn McCambridge, senior grains analyst with Prudential Financial in Chicago.

 

The sheer strength of speculative funds kept many buyers on the sidelines, as liquidation in outside markets roll over into grains easier with investment funds intertwined into commodities and equities, McCambridge added.

 

Technical pressure from the week's volatile price action weighed on prices, with profit taking pressure adding to the losses as well. However, futures were unable to challenge Thursday's lows, giving traders some confidence that liquidation pressure may be exhausting, traders said.

 

Overall, the market did not know what to do once liquidation pressure cooled, but support from long-term bullish outlooks kept prices underpinned. Data from the outlook conference did not surprise anyone, but it did emphasize the need for a better-than-normal growing season this year, McCambridge added.

 

Carryover corn stocks for the 2007-08 marketing year will be 637 million bushels - down from a February prediction of 660 million, USDA economists said in a paper prepared for the USDA's annual Agricultural Outlook Forum. The USDA now expects U.S. farmers to plant 87 million acres of corn in 2007 and produce 12.195 billion bushels of the grain. The USDA maintains in its forecast released Friday that corn use for ethanol in 2007-08 will rise by 50% to 3.2 billion bushels from 2.15 billion in 2006-07.

 

Corn yields, though, are now forecast lower for this year than the USDA predicted last month. The USDA said Friday its new forecast for the average yield is 152.8 bushels per acre, down slightly from its estimate of 153.1 bushels per acre.

 

Meanwhile, the DTN Meteorlogix Weather forecast said additional snowfall of up to six inches is on tap for Minnesota, the eastern Dakotas and northern Iowa before drier weather develops on Sunday. Strong winds of more than 30 miles an hour are also in store for this area, along with temperatures well below normal.

 

Soil-moisture contributions from the heavy snow have the potential to be notable; however, much of the moisture will run off due to frozen soil surfaces. The eastern Midwest has some flooding concerns after rainfall of up to 1 1/2 inches Thursday. Weather conditions for next week offer the potential for above-average precipitation in the Ohio Valley and Missouri Bootheel.

 

In pit trades, ADM Investor Services, Calyon Financial and Citigroup each bought 300 May, Man Financial bought 500 May and 500 December.

 

ADM Investor Services sold 1,000 December, JP Morgan sold 1,000 July, Man Financial sold 500 May and 500 July, Rand Financial sold 500 December, and UBS Securities sold 400 May and 800 July. Speculative fund selling was estimated at 5,000 contracts.

 

Day session volume on the e-CBOT platform was 116,121 contracts.

 

CBOT oat futures ended lower across the board, pressured by speculative long liquidation amid spillover weakness from other grains and outside markets. May oats closed 3 1/2 cents lower at US$2.46 per bushel and December ended 2 3/4 cents lower at US$2.44 1/4.

 

Ethanol futures ended mixed, with the March contract settling 0.015 higher at US$2.295, and the April contract settling 0.010 lower at US$2.200.