March 21, 2006

 

CBOT Corn Review on Monday: Retreats; specultive selling still in command

 

 

Chicago Board of Trade corn futures carved out new lows for the current move, stumbling to there lowest levels in two months Monday, as speculative sellers continue to dictate price direction.

 

CBOT May corn settled 3 1/4 cents lower at US$2.18 1/4, and July corn ended 3 1/2 cents lower at US$2.28 3/4.

 

Speculative and local selling were featured attractions, with bearish technical momentum, spillover pressure from wheat futures, lingering fears of bird flu and favorable pre-planting weather conditions promoting a defensive tonnee, analysts said.

 

The theme was consistent from the outset, with sellers encouraged by the May contract's ability to penetrate underlying support levels. The market continues to gradually satisfy near-term downside objectives, with traders looking for a sign that speculative long liquidation pressure has run its course before aggressively buying price breaks, said a CBOT commission house broker.

 

Heading into Monday's session, analysts estimated fund combined futures and options long positions in the neighborhood of 139,000 contracts. Traders said the sizable positions still leave room for additional liquidation to occur.

 

Meanwhile, good underlying export demand remains a supportive attribute in the market, as futures are seemingly pricing itself into consumption. Commercial pricing beneath the market was seen limit downside movement.

 

Nevertheless, technical selling was a key driver of prices, with funds trimming market length and bearish options plays keeping many buyers on the sidelines.

 

U.S. Department of Agriculture said corn inspected for export in the week ended March 16 totaled 44.968 million bushels. Analysts expected corn inspections in a range of 34 million to 40 million bushels. Accumulated corn export inspections for the 2005-06 marketing year total 1.008 billion bushels, above last year's 938.714 million at the same time.

 

In pit trades, JP Morgan bought 1,000 May, Citigroup bought 1,400 May, Fimat bought 1,000 July, RJ O'Brien bought 1,000 May, Rosenthal bought 800 July and Tenco bought 800 May.

 

On the sell side, ADM Investor Services sold 2,300 May, ABN Amro sold 7,000 May and 3,000 July, Calyon Financial sold 1,000 May, Fimat sold 500 May and 400 July, Man Financial sold 1,000 May and 500 July. Commodity funds were estimated sellers of 8,000 contracts.

 

In options, ABN Amro was a reported seller of 17,000 July US$2.20 calls.

 

Ethanol futures ended lower Monday. The April ethanol contract settled 3 cents lower at US$2.39 per gallon.

 

Oat futures ended lower across the board, extending the current market downturn to 5 month lows on speculative sales and technical weakness. CBOT May oat futures settled 2 cents lower at US$1.70 3/4 and July oats ended 1 cent lower at US$1.74 1/2 per bushel.