May 18, 2006

 

CBOT Corn Review on Wednesday: Higher on spillover as wheat surges

 

 

July corn futures at the Chicago Board of Trade rose to 9 1/2-month highs Wednesday as a late surge in the wheat pit caught corn traders' attention and attracted commodity fund buying, analysts said.

 

CBOT July corn settled 4 cents higher at US$2.63 a bushel and September also gained 4 cents, to US$2.74.

 

Most-active July hit its strongest price since Aug. 1, 2005, with the climb to US$2.63 1/2 in late trade. September corn set a new contract high of US$2.74 1/2.

 

The market had traded on both sides of unchanged during the session, and commodity funds and speculative accounts were net sellers of 5,600 contracts in afternoon dealings. The reversal, however, was encouraging for market bulls, a trader said.

 

"You had to be impressed with the way corn acted today," said Vic Lespinasse, floor broker and analyst at A.G. Edwards in Chicago.

 

With the late rally, he suspects funds may have ended up small net buyers in corn.

 

While the bearish influence of the outside markets such as crude oil, gold and stocks was cited earlier as weighing on corn, that effect diminished as the session wore on and as wheat bulls kicked into high gear.

 

"I think we divorced ourselves from the influence of the outside markets today, because the strength in wheat was just overpowering," said Lespinasse.

 

Corn futures had little fresh news to influence the trade and therefore became a follower of wheat. Midwestern weather remains cool and damp in some areas, but with less than 15% of the crop to plant and warmer temperatures on the way next week, there is little cause to worry, traders said.

 

"If there's weather problems then corn will come into its own, but for now corn's in pretty good shape planting-wise and weather-wise," added Lespinasse.

 

Argentina's 2005-06 corn crop is estimated at 14 million tonnes, unchanged from a previous report, the country's Agriculture Secretariat said Wednesday. Corn planted area was also unchanged at 3.05 million hectares. The area projection is down 10.3% from 2004-05 due to poor planting weather.

 

In export news, 119,888 metric tonnes of corn were sold to Japan for the 2005-06 marketing year, the USDA said Wednesday.

 

At the CBOT, Fimat was a featured seller of 7,000 corn contracts as of 1:30 p.m. EDT. This helped restrain potential gains at the time, but the late pop in wheat prices played into the hands of market bulls and corn prices were dragged along for the ride to higher levels.

 

Calyon Financial bought 1,000 December, Man Financial bought 400 September and J.P. Morgan bought a net 500 December. UBS sold 1,000 December, J.P. Morgan sold 700 September, ADM and Citigroup Global Markets each sold 500 July, O'Connor sold 500 September, Rand Financial sold 400 July and Refco sold 300 July.

 

Heavy options trade from Refco and Fimat was also cited in corn. Refco bought 3,000 December US$2.60 puts and Fimat bought 4,000 December US$3.80 calls. Fimat also bought 4,000 December 2008 US$4.00 calls.

 

July ethanol futures rallied along with the gains in corn and finished 10 cents higher at US$2.95 a gallon.

 

July oats followed the strength in the grain pits and added 4 3/4 cents to US$2.02 1/4 a bushel.