April 11, 2008

 

CBOT Corn Review on Thursday: Down; funds sell, nervous longs exit

 

 

U.S. corn futures fell Thursday on speculative fund selling that pulled prices off their record pace amid profit-taking and nervous longs getting out of the market ahead of the weekend, brokers and analysts said.

 

May pit-traded corn on the Chicago Board of Trade fell 10 3/4 cents to settle at US$5.94 1/2, July was down 10 1/2 cents at US$6.07 1/2 and December lost 8 3/4 cents to end at US$6.11 1/4 a bushel.

 

Speculative selling in key markets such as crude oil and precious metals, which drove the major commodity indexes lower, also encouraged selling in corn. Funds sold an estimated 2,000 contracts and were seen on both sides of the market.

 

The weather forecasts hold the key to price activity, however, and the current round of wintry/stormy weather circulating over the Midwest continues to keep producers out of the fields.

 

National Weather Service forecasts pointed to a period of drier weather next week, which likely influenced some of the selling in corn.

 

"We've seen those forecasts change often and not be realized, but if we had a drier pattern farmers could get a lot accomplished," said Shawn McCambridge, senior grains analyst at Prudential Bache in Chicago.

 

"You have to keep in mind, they accomplished a lot of fieldwork last fall, so there's not a lot they have to do to get the seedbed ready," he explained.

 

Still, there is enough conflict among weather models to make participants unsure whether the drier conditions will last long enough to aid planting or if it will precede another round of stormy weather late next week or next weekend. Traders are increasingly nervous due to these discrepancies and many will likely exit positions amid fear they may change dramatically over the weekend, McCambridge said.

 

Private forecaster T-storm Weather said its best estimate calls for a brief period of warmth to spread from west to east next week over the corn belt, which will aid snow melt, drying and soil warming. More than a few days of dry weather will likely be needed, however, because of anticipated wet, cold conditions through early next week, it said.

 

Despite Thursday's setback, traders took corn to all-time highs this week on the bullish fundamentals of increased usage, expected smaller planted area and stronger exports, most of which were detailed in Wednesday's release of the U.S. Agriculture Department's April supply/demand report. Farmers are expected to plant 8% fewer acres to corn this year, according to the USDA's March planting intentions report, though analysts widely anticipate an additional 1 million to 2 million acres will get planted to corn with the crop trading at such lofty levels.

 

A return to a drier, warmer weather pattern will aid efforts to get additional corn acres planted.

 

In other news, export sales for the week to April 3 were significantly below estimates at 483,500 metric tonnes, amid expectations for 700,000 to 1.05 million tonnes. For 2007-08, a marketing year low of 473,900 tonnes was sold, which was also down 32% from the previous week, the USDA said. The 2008-09 year saw sales of 9,600 tonnes.

 

Corn shipments, however, improved to 1,254,700 tonnes, up 10% from the previous week and 1% above the previous four-week average, the USDA said.

 

The lower export figure simply shows that potential importers have enough supply that they are not willing to chase corn with prices at or near all-time highs, McCambride said.

 

Traders associated with the Goldman Sachs Commodity Index continued to roll positions out of May and into July and other months, as the "Goldman Roll" will continue through Friday.

 

Goldman Sachs upwardly revised its corn outlook as the bullish supply/demand balance sheet has taken the U.S. 2007-08 stocks-to-use ratio down to 9.1% from 10.3% previously and the global ratio to 12.4% from 13% previously. Goldman maintains its 3-month forecast of US$6.50 a bushel, but raised its six- and 12-month projections to a respective US$7.25 and US$6.50, from US$6.50 and US$6.00 previously, reflecting larger-than-expected feed demand for the 2007-08 old crop and lower-than-expected ending stocks for the 2008-09 crop year, the firm said in a research note.

 

In other markets, CBOT oat futures slipped on spillover pressure from setbacks in other feed grains, a floor trader said. May oats finished down 1 3/4 cents at US$3.87 1/4 per gallon.

 

Ethanol futures closed lower. May ethanol shed 3 cents to US$2.525 per gallon.