March 23, 2006

 

CBOT Corn Review on Wednesday: Market drifts lower on fund sales

 

 

Corn futures on the Chicago Board of Trade fell modestly Wednesday in the absence of aggressive speculative buying and as prices consolidated recent gains amid a lack of fundamental direction, sources say.

 

Funds sold an estimated 2,000 contracts during the session.

 

May corn lost 1 cent to US$2.22 1/2 a bushel and July fell 1 cent to US$2.33 1/2.

 

"Yesterday (Tuesday) we had a pretty good pop in the market, and a lot of that was related to fund buying and option positioning. Today we just didn't have that leadership," said Shawn McCambridge, senior grains analyst at Prudential Financial in Chicago.

 

Without the strong fund buying interest, prices drifted lower on the bearish influences of improving soil moisture in the Midwest and plenty of old-crop supplies in the pipeline.

 

"In a fundamental sense, there's really nothing going on in the market right now, so prices should just kind of consolidate and drift in a sideways pattern - unless we get a day like Tuesday where the funds come in and buy 19,000 contracts," McCambridge said.

 

Unless the funds want to come in and support the higher levels, "no one else is going to," he added.

 

Traders did attempt to extend gains at one point during the session, forcing prices into positive territory, but the buying dried up and bearish traders took control of the market.

 

The USDA said Wednesday morning that 168,000 metric tonnes of 2005-06 corn were sold to private exporters to destinations unknown.

 

In other news, U.S. Energy Secretary Samuel Bodman said Wednesday there are adequate ethanol supplies for oil companies to use in reformulated gasoline as they phase out the use of methyl tertiary butyl ether, or MTBE. New ethanol plants are starting up "at a rapid clip right now," he said.

 

MTBE has been blended with gasoline to limit tailpipe emissions and meet the oxygenate requirement, but the additive also has been linked to cancer and contaminated ground water. Ethanol will likely replace MTBE in gasoline in many East Coast and Texas markets now that the Environmental Protection Agency in May will revoke the oxygenate requirement for reformulated gasoline.

 

Technically, May's corn's rise to a US$2.25 1/4 session high created a double-top area on the charts and will provide a first layer of resistance. Moving-average resistance rests above the market at US$2.26 1/2 and US$2.31 a bushel. Support is uncovered at US$2.21 and the US$2.17-US$2.17 1/2 area.

 

ABN Amro bought 600 July and 500 May, Man Financial bought 600 May, Calyon Financial bought 600 May, Citigroup Global Markets and Tenco each bought 500 May, Rosenthal bought 300 May, R.J. O'Brien bought 200 Dec and Fimat bought 200 May.

 

The Refco division of Man Financial sold 1,000 May, ABN Amro and Calyon Financial each sold 600 May, Fimat sold 600 May and 200 July, J.P. Morgan sold 500 May and Citigroup sold 300 May.

 

The Refco division of Man Financial spread 1,000 May US$2.30-US$2.40 calls.

 

ABN spread 1,000 July/May contracts while Fimat spread 500 of the same.