March 16, 2006

 

CBOT Corn Review on Wednesday: Down on fund sales, wheat, soy spillover

 

 

CBOT corn futures closed lower Wednesday as early fund buying turned into selling, while a lower trade in the wheat and soybean pits also exerted pressure on the market, sources said.

 

Recharging soil-moisture levels in the Midwest and the lack of strong index-fund buying also weighed on the market.

 

May corn settled 2 1/2 cents lower at US$2.29 1/4 a bushel and July fell 2 1/4 cents to US$2.39 1/2.

 

"We didn't have the big German bank buying that we saw yesterday, and so when that seemed to fail the market paid more attention to things like improving soil moisture, bird flu and a slowing world feed demand profile and the prospect that corn prices at these levels are buying a few acres away from beans," said Dan Basse, grains analyst and president of AgResource in Chicago.

 

Index fund Deutsche Bank was a prominent buyer of December corn on Tuesday, helping to spark gains in the overall market.

 

Fund buying did exist in the market Wednesday, but it was countered by fund and commercial sales that picked up later in the session. Funds were net sellers of an estimated 1,000 corn contracts.

 

Light rain and snow is expected to develop in the Midwest from west to east late Wednesday and into Thursday. The weather event is expected to end on Thursday, with precipitation amounts ranging from 0.10-0.25 inch, DTN Meteorlogix said. Dry conditions with a few light flurries are expected over the weekend.

 

The deadly H5N1 strain of avian flu continues to spread around the world.

 

Indian authorities plan to slaughter about 75,000 chickens in four villages where an outbreak was found. However, tests were still being conducted to determine whether the infected chickens had the H5N1 strain of the virus.

 

A laboratory in the E.U. confirmed Wednesday that dead birds found in Sweden had been infected with the deadly strain.

 

Afghanistan officials said Wednesday they are 99% certain that the country's first bird flu outbreak is the H5N1 strain, after receiving results from preliminary tests. Further tests are expected to confirm the outbreak.

 

While U.S. corn exports have continued strong despite the spread of bird flu, Basse said it is impossible to assess the virus's effect on the market.

 

"You can't put a number on it other than to say it's having its impact and growing. I'm afraid world feed numbers going forward are going to be going down rather than going up," he said.

 

Weekly export sales are scheduled to be released Thursday at 0830 EST. Basse looks for 900,000-1.2 million metric tonnes, compared to 1.43 million tonnes the previous week.

 

Canada's Border Services Agency said Wednesday in a final ruling that it will maintain a provisional duty of US$1.65 a bushel on imports of U.S. grain corn. The decision reaffirms a preliminary determination of dumping and subsidizing made on Dec. 15.

 

Technically, May corn finds support at US$2.27 1/2, then Tuesday's US$2.25 3/4 low. Resistance is met at US$2.33, then the gap that runs from US$2.35 3/4-US$2.37 3/4. The March 3 high of US$2.40 provides further resistance.

 

Analyst Boyd Baker of IRA Epstein & Co. in Chicago said he can't get bullish on May corn until it can trade above the US$2.35 3/4 high from March 10.

 

Fimat sold 1,000 May, Cargill sold 400 May and 200 December, Merrill Lynch, Rand Financial and Prudential Financial each sold 200 May, Refco sold 300 May and Tenco sold 200 July.

 

Fimat bought 1,000 July and 200 May, Calyon Financial bought a net 100 May and R.J. O'Brien bought 500 May.