May 19, 2006

 

CBOT Corn Review on Thursday: Futures scale back previous gains

 

 

Chicago Board of Trade corn futures ended on the defensive Thursday, scaling back prior gains amid the absence of supportive features to maintain previous highs.

 

CBOT July corn ended 2 3/4 cents lower at US$2.60 1/4 and December corn finished 2 3/4 cents lower at US$2.71 1/4.

 

The market lacked the fundamental support to sustain Wednesday's advances, with bearish old crop fundamentals leaving the market a bit overpriced, said Shawn McCambridge, senior grains analyst with Prudential Financial in Chicago.

 

However, traders were encouraged by the market's ability to hold up in the face of selling pressure, with solid weekly export sales seen as an underpinning force.

 

Export sales were the one bright spot for corn, but the market needs strong exports on a consistent basis to make the U.S. Department of Agriculture's current projections, added McCambridge.

 

Analysts say the market continues to encounter reluctant selling as traders remain fearful that speculative buying could reemerge at any time.

 

Meanwhile, old/new crop spreads widened Thursday, as uncertainty surrounding new crop production amid extremely strong demand projections is managing to provide underlying support, said McCambridge. Export sales for the week to May 11 totaled 1.539 million metric tonnes for the 2005-06 crop, up 39% from the previous week and 44% higher than the prior four-week average. Sales of 51,100 tonnes also were reported for the 2006-07 crop. Traders had expected sales in a range of 800,000-1.1 million tonnes.

 

The DTN Meteorlogix weather outlook said the next five days will have several periods of showers across the Midwest. In addition, rainfall in the six-to-10-day time frame, through the last weekend of May, offers above-average rainfall for all but the southwest sectors of the region (southern Iowa, northern Missouri, southeast Nebraska, northeastern Kansas). Temperatures will be variable, in the normal range, with no extremes. In general, weather conditions will be favorable for completing planting, along with early growth of corn and soybeans, Meteorlogix said.

 

In pit trades, Fimat bought 700 July, Goldenberg Hehmeyer bought 800 December, Kottke bought 600 July, and Refco bought 300 September.

 

On the sell side, ABN Amro sold 1,000 July, Fimat sold 1,300 July, JP Morgan sold 500 July, Calyon Financial and Man Financial each sold 300 July.

 

Ethanol futures moved higher Thursday. The July ethanol contract settled at US$3.03 and June futures ended at US$2.98 per gallon.

 

Oat futures ended mixed Thursday, pulling back from early gains. The market experienced early gains, but exhausted buying at session highs attracted long liquidation and profit taking to pull prices near unchanged levels. A lack of fundamental support at current prices produced overbought conditions, said McCambridge. CBOT July oat futures settled 1/2 cent lower at US$2.01 3/4 and December oats ended 1/2 cent higher at US$1.93 1/2 per bushel.