May 16, 2006

 

CBOT Corn Review on Monday: Up on fund buying of 12,000 plus futures

 

 

Chicago Board of Trade corn futures ended mostly firm Monday, recovering late in the session as technical support held, to reaffirm Friday's double-digit gains, brokers said.

 

"We were lower early on double-digit losses in the soybeans, but there was a high volume rally last week on rising open interest, and that's supportive," one CBOT corn trader said late Monday. "Also, the test of the recent breakout (in July corn) at US$2.55 3/4 held.

 

"Last week's weekly corn chart showed an outside bullish week, so the major concern is whether the (CBOT corn) market drifts sideways and then falls, potentially leaving Friday's buyers still long," he added. "The 9-day relative strength index for July (corn) is in the mid-70s, showing overbought conditions."

 

Friday's active trade followed the U.S. Department of Agriculture's forecast that the U.S. 2006 corn stocks-to-use ratio would drop to 9.8%, as U.S. corn ending stocks were seen dropping to 1.14 billion bushels.

 

"Export increases in both old-crop (plus 75 million bushels) and new-crop (plus 150 million) as well as ethanol's U.S. demand for corn hitting 2.15 billion (the same as overseas demand), were behind the dramatic crop in 2006-07 stocks," said Jerry Gidel, a grain analyst at North America Risk Management Services, in a report Monday.

 

"The USDA also tightened its world corn stocks forecast to 92 million metric tonnes from 129 million metric tonnes this year because of reduced foreign competition from feed wheat and expanding grain for fuel demand due to strong energy prices," he noted.

 

Monday's weekly U.S. corn inspections of 43.943 million bushels, above estimates of 36 million to 39 million, were supportive, brokers said.

 

In overnight news, the USDA announced Monday private export sales of 113,000 metric tonnes of U.S. corn for delivery to South Korea in the 2005-06 marketing year.

 

Monday's mostly firm close in CBOT corn bucked losses in neighboring CBOT wheat and precious metal futures markets and strength in the dollar, brokers noted.

 

CBOT July ended up 1 3/4 cents at US$2.60 per bushel, with Friday's 9-month high of US$2.62 remaining intact.

 

The new-crop December contract settled up 2 cents at US$2.83 3/4 while Friday's new contract high of US$2.86 held.

 

Speculative commodity funds bought about 12,000 contracts Monday, led by Calyon and Tenco's purchases of 2000 July each, brokers said.

 

CBOT corn futures open interest before Monday's grains open outcry bell was a record 1.295 million contracts while corn options open interest was a record 838,856 contracts.

 

Traders expect the USDA late Monday to report U.S. corn plantings are 81%-83% complete, on par with the average of 80%.

 

Forecasts called for drier conditions in the eastern Corn Belt beginning Tuesday after weekend rains of up to 1 inch in Indiana and Ohio, brokers noted.

 

CBOT oat futures settled mixed Monday following late gains in neighboring CBOT corn futures. The July contract ended up 3/4 cent at US$1.97 3/4 per bushel while the December contract finished up 1 cent at US$1.92.

 

CBOT ethanol futures settled lower, following losses in energy futures, with June ethanol down 5 cents at US$2.85 per gallon and July down 1 cent to US$2.80.