June 18, 2008

    

Speculators pile in on rising US corn market

Speculators helped drive the recent rally in corn prices to record highs, according to the US Commodity Futures Trading Commission.

 

The Commodity Futures Trading Commission's traders report last week showed traditional speculative funds increased their Chicago Board of Trade long positions by 34,732 contracts, to 284,281. Speculators are net long 219,041 contracts.

 

Sparked by heavy rains that have caused widespread flooding in the Midwest Corn Belt, CBOT July corn prices rose from an intraday low of US$5.73 on May 29 to US$7.32 1/2 Monday. Prices hit a record high of US$7.60 earlier this week. 

 

The CFTC report was released Friday (June 13, 2008) but it reported positions only through June 10. Speculative long positions have likely increased since then, said John Kleist, a broker/analyst with Allendale in McHenry, Ill.

 

One sign of that growth is that open interest increased 32,000 contracts on Thursday alone, Kleist said.

 

Index funds increased their long positions by 13,258 contracts, to 475,731, putting them net long 427,352 contracts, the CFTC reported. Analysts say the index funds' positions typically change more slowly than the traditional index funds.

 

Widespread media coverage of the event added fuel to the fire, prompting a tremendous influx of speculative money to pour in, analysts said.

 

"This has been a well-publicized thing," said Price Futures Group Vice President Jack Scoville, who attributed much of the coverage to how quickly the situation deteriorated.

 

A trader said fund-buying has increased since the CFTC issued policy changes on June 3 that many analysts felt would have little impact. Rumors of the CFTC action had worried speculative funds prior to that, particularly index funds, which were seen as a likely target of the CFTC. The supplemental commitment of traders report showed index funds cut 7,571 contracts from their long positions leading up to the announcement.

 

But Scoville said he it was that there would be much of a jump in speculative money directly related to the CFTC announcement.