March 18, 2006

 

CBOT Corn Review on Friday: Falls to new move lows on spec sales

 

 

Corn futures on the Chicago Board of Trade continued its descent from previous highs Friday, extending to new lows for the current move as speculative long liquidation pressed prices below support levels.

 

CBOT May corn settled 3 cents lower at US$2.21 1/2, and July corn ended 2 3/4 cents lower at US$2.32 1/4. For the week, May corn was 13 cents lower and July corn was down 12 3/4 cents.

 

Speculative long liquidation was the feature of the day, with the ability of active contracts to pierce below key support levels uncovering large fund and local selling, analysts said.

 

The theme was consistent throughout, with selling from JP Morgan and ADM Investor Services sending prices backpedaling. A weak technical outlook, bearish supply fundamentals, improved soil moisture conditions and the expansion of bird flu outbreaks kept futures in a defensive posture, traders added.

 

The absence of fresh fundamental influences kept traders eyeing technical objectives, with the active May future eclipsing last week's low and then its 100-day moving average to entice speculative traders into trimming length in the market. Nevertheless, commodity funds still command sizable long positions, with traders estimating the fund length at 151,000 contracts heading into Friday's session.

 

Bearish options related activity added to the defensive tonnee, with large commission house buying of the May US$2.20 put sending bearish signals to the futures pit as well, traders added. Meanwhile, strong commercial buying in the December contract managed to provide underlying support to new crop futures.

 

The DTN Meteorlogix forecast said showers and thunderstorms will develop in the eastern Midwest and Delta, with widespread coverage in the Delta, late in the weekend through the first of next week. There may be some late snowfall in the eastern Midwest as well.

 

Rainfall of up to five inches is forecast for the Delta, with up to one-and-one-half inch in the Ohio Valley. The rainfall will add more moisture to soil profiles.

 

In pit trades, JP Morgan bought 500 May and 400 December, Fimat bought 700 May, Iowa Grain bought 700 December, RJ O'Brien bought 600 December, Tenco bought 700 December.

 

On the sell side, JP Morgan sold 5,000 May, ADM Investor Services sold 5,000 May, Citigroup sold 1,000 May, Calyon Financial sold 800 May and 400 December, Man Financial sold 1,000 May and 400 July, Merrill Lynch sold 1,200 May, O'Connor sold 2,500 May and 1,200 December, ADM Investor Services sold 400 May.

 

Commodity fund selling was estimated near 17,000 contracts. In options, ABN Amro bought 8,000 May US$2.20 puts.

 

Ethanol futures ended mixed Friday. The April ethanol contract settled 2 cents higher at US$2.42 and July ethanol settled 5 cents lower at US$2.35 per gallon.

 

Oat futures ended lower across the board, stumbling to 4 1/2 month lows on speculative sales and technical weakness. CBOT May oat futures settled 2 1/2 cents lower at US$1.72 3/4 and July oats ended 1/4 cents lower at US$1.75 1/2 per bushel.