June 12, 2007

 

CBOT Corn Review on Tuesday: Surges on weather forecasts, technical buying

  

 

Chicago Board of Trade corn futures settled sharply higher Monday, supported by stronger prices in overnight activity based on dry near-term weather forecasts for much of the U.S. Midwest and technical buying, with the government's supply and demand report having little price influence, analysts said.

 

July corn jumped 14 cents to US$3.96 per bushel, September rallied 14 3/4 cents to US$4.05, and December gained 13 3/4 cents to US$4.06.

 

Overnight weather forecasts predicting a blocking ridge would form limiting rainfall for already dry areas of the eastern U.S. Midwest supported prices early in the session with spillover from stronger wheat futures adding to the gains, a commission house analyst said. July wheat rallied 28 1/2 cents to US$5.56 per bushel after spending part of the session limit up or 30 cents higher.

 

The U.S. Department of Agriculture's June supply and demand report had little influence on price direction with the lack of any substantial changes limiting its impact, an analyst said.

 

The USDA increased its estimate of 2007-08 ending stocks by 50 million bushels to 997 million, in line with analysts' expectations. The 2006-07 ending stocks were also increased by the same amount as the USDA lowered its export estimate to 2.150 billion bushels from its previous estimate of 2.200 billion.

 

The report was neutral and the market focused on the weather as the crop is getting closer to its pollination stage, an analyst said.

 

Technical buying with nearby July futures trading above overhead resistance at US$3.96 1/2, the recent high established in early May, added to the strength, a trader said.

 

Most midday weather forecasts deviated little from earlier outlooks and corn continued to be supported by the weather, the trader added.

 

Light profit-taking as wheat came off its limit-up level trimmed some of the rally, an analyst said.

 

Corn could see some profit-taking Tuesday as it is short term overbought, but price direction depends on Monday afternoon's crop condition ratings and the overnight forecasts, a trader said.

 

Analysts expect corn ratings to decline by 1 to 3 percentage points in the good-to-excellent category. Last week, 78% of the U.S. corn crop was rated in good-to-excellent condition.

 

In open auction trading, JP Morgan bought 700 December, and UBS sold 1,000 December.

 

Commodity fund buying was estimated at 8,000 contracts.

 

In options trading, Man Financial bought 3,000 September US$4.80 calls and Rand sold 1,000 July US$4.00 calls.

 

Oat futures settled higher with the deferred months supported by bear market spreading and the nearby contracts underpinned by spillover from the gains in wheat and corn, an analyst said.

 

July oats settled 2 1/2 cents higher to US$2.94 1/2 per bushel and December gained 7 1/2 cents to US$2.89 1/2. July, September and December all made new-life-of contract highs on daily technical charts.

 

Ethanol futures ended higher in modest activity. July ethanol gained 2 cents to US$1.94 per gallon and August jumped 10 cents to US$2.01.

 

On Monday afternoon, the USDA is scheduled to release the weekly crop progress report at 4 p.m. EDT (2000 GMT).