April 12, 2007

 

CBOT Corn Review on Wednesday: Ends lower on corn/soy spread unwinding

 

 

Chicago Board of Trade corn futures ended lower across the board Wednesday, backpedaling on corn/soybean spread unwinding amid weather forecasts raising the potential for farmers to return to planting corn next week in the Midwest.

 

May corn settled 8 1/4 cents lower at US$3.60 3/4, July corn ended 8 1/2 cents lower at US$3.72 3/4, and December finished 6 3/4 cents lower at US$3.87 3/4.

 

Corn/soybean spread unwinding was a featured attraction, with forecasts calling for the western corn-belt to experience drier conditions next week, encouraging traders to trim risk premium from prices, said Mike Zuzolo, senior analyst with Risk Management Commodities Inc. in Lafayette, Ind.

 

Analysts said it's still very early in the planting season, and the market didn't want to get too far ahead of itself with drier conditions forecast for next week. The spread unwinding kept a defensive tonnee flowing, with index fund rolling of positions allowing the old crop/new crop spread to narrow, traders said.

 

Otherwise, the market was trying to find a price level that will stimulate demand, particularly with recent export inspection numbers coming below expectations, said Brian Hoops, president Midwest Market Solutions in Yanktonne, S.D.

 

Nevertheless, the trade remains clearly focused on weather and planting prospects, with nearby wet, cold conditions seen as already adequately discounted in the market, traders added.

 

The DTN Meteorlogix forecast calls for snow to move eastward through the remainder of the northern Midwest on Wednesday, with totals of up to nine inches in southern Minnesota, northern Iowa, Wisconsin and northern Illinois. Elsewhere in the Midwest, rain showers will bring up to an additional half inch of precipitation. A second weather system will move across the Midwest during the weekend and will produce up to one inch of rainfall. Temperatures will remain below to much-below normal; thus, no field work is likely to be done in the Midwest before next week. An unsettled weather pattern remains in the forecast for the central U.S. during next week, in addition to the wet and cool weather this week.

 

On Thursday, U.S. Department of Agriculture is scheduled to release weekly export sales figures for the week ended April 5 at 8:30 a.m. EDT. Analysts surveyed by Dow Jones Newswires estimated corn sales would range from 600,000 to 850,000 metric tonnes.

 

In pit trades, FCStonnee and JP Morgan each bought 600 July, Man Financial bought 300 December, and USA Trading bought 500 July. Tenco sold 1,300 December, UBS Securities sold 1,000 December, JP Morgan sold 400 July and 500 December, Rand Financial sold 600 December, and Man Financial sold 400 December. Speculative fund selling was estimated near 7,000 contracts.

 

Nearby CBOT oat futures closed mostly lower, under pressure from fund selling, while fund buying boosted the December contract, a floor trader said. May oats settled 1 cent lower at US$2.77 1/2 per bushel, and July oats ended 1 1/4 cents lower at US$2.84 1/4. December oats finished up 2 1/4 cents at US$2.63 1/4.

 

CBOT ethanol futures ended Wednesday's day session higher. May ethanol rose US$0.071 to US$2.237 a gallon, and July closed up US$0.014 at US$2.60.