May 12, 2007

 

CBOT Corn Review on Friday: Ends sharply higher after USDA report

 

 

Chicago Board of Trade corn futures settled sharply higher Friday, boosted by speculative buying after the U.S. Department of Agriculture reported new crop ending stocks below estimates.

 

May corn rallied 15 1/4 cents to US$3.61 per bushel, July surged 14 3/4 cents US$3.69 1/4, and December gained 18 cents to US$3.74 1/2.

 

The USDA estimated 2007-08 corn ending stocks at 947 million bushels, below the average analyst estimate of 1.058 billion bushels and nearly unchanged with the 937 million bushels forecast for the 2006-07 marketing year.

 

The report underscores how badly favorable weather is needed this summer to produce a large enough crop to meet expected demand, a commission house analyst said.

 

The government increased its estimate of corn used for ethanol to 3.400 billion bushels, from the 2.150 billion this year as the ethanol industry continues to grow. The demand for corn doesn't appear to be slowing down, the analyst said.

 

Export demand next year is expected to decline from this year's total. The government expects corn exports to decline to 1.975 billion bushels in 2007-08, down from the 2.200 billion bushels forecast this year, as higher prices and better production in other countries reduces demand, the USDA said.

 

Corn used for feed is projected to decline by 150 million bushels as dried distiller's grains and other feeds take the place of corn, the government said.

 

Speculative and technical buying added strength to the rally, floor traders said.

 

Commodity fund buying was estimated at 10,000 contracts. Technical buying supported prices helping July rebound from Thursday when it fell to six-month lows and settled below its 200-day moving average for the first time since September.

 

The corn market was heavily oversold and due for a technical correction, said Vic Lespinasse of AG Edwards & Sons.

 

The weather has been favorable recently for corn planting and early development in most of the U.S. Midwest and market direction on Monday will depend on the late weekend forecasts, Lespinasse said.

 

On daily open auction charts, July corn settled above its 200-day moving average.

 

In options trading, Man Financial bought 800 December US$4.20 calls and sold 800 December US$3.50 puts.

 

Oat futures settled slightly higher in lackluster trade supported by the gains in corn and wheat as well as light fund buying, a floor trader said.

 

July oats settled 1/4 cent higher at US$2.55 3/4 per bushel while December gained 2 3/4 cents to US$2.49 3/4.

 

Ethanol futures ended mostly higher in light trading. June ethanol settled 1.4 cents lower at 2.12 3/4 per gallon and July rose 1 cent to US$2.105.

 

On Monday, the USDA is scheduled to release the weekly crop progress report for the week ending May 13 at 4:00 p.m. EDT (2000 GMT).