July 4, 2006

 

CBOT Corn Review on Monday: Climbs on weather worries; speculative Buying

 

 

Chicago Board of Trade corn futures ended sharply higher Monday, climbing to their highest levels in over two weeks, as the market added risk premium on weather concerns.

 

CBOT July corn ended 7 3/4 cents higher at US$2.43 1/4 and December corn 8 1/4 cents higher at US$2.68 1/2.

 

The market is encountering some legitimate weather threats to the 2006 crop, with long-range weather models predicting hotter and drier conditions for the Midwest heading into the crop's critical pollination phase of development, said Shawn McCambridge, senior grains analyst with Prudential Financial in Chicago.

 

Speculative buying was a featured attraction, with nervous shorts running for cover as the market positions itself for potential problems that may arise if adverse weather conditions emerge across the crop belt, analysts said.

 

Weather was definitely the key driver of prices. Seasonal buying that occurs heading into pollination and the threats to production that adverse weather has on crops during this period were enough to keep prospective sellers on the sidelines, McCambridge added.

 

The theme was consistent from the outset, with technical strength a key factor as prices propelled through key resistance levels over the course of the day. Overall action was relatively subdued, but advances did accelerate to session highs in late dealings on noon weather forecasts projecting stressful conditions in an 8- to 14-day period.

 

The DTN Meteorlogix weather outlook said a few thunderstorms were moving through the Midwest from Iowa through Illinois Monday, with local precipitation of up to one inch. Drier weather will then set in throughout the region from mid to late week. Temperatures will be less hot, ranging from the mid 80s to low 90s Fahrenheit.

 

Next week is expected to bring a return of mainly hot and dry weather. Temperatures will be near to above normal, and rainfall near to below normal. These conditions will be stressful for pollinating corn; the most notable areas for stress will be across Iowa, eastern Nebraska and northern Missouri, Meteorlogix said.

 

In pit trades, ABN Amro bought 900 December, Fimat bought bought 2,600 December, Iowa Grain bought 1,000 December, Tenco bought 1,500 September, and Man Financial bought 500 December.

 

On the sell side, ADM Investor Services sold 1,500 December, JP Morgan sold 1,000 December, and Rosenthal sold 700 December.

 

Commercial firms were estimated sellers of 2,500 contracts on the day, while speculative funds were estimated buyers of 4,000 contracts.

 

Ethanol futures moved higher Monday. The August ethanol contract settled at US$2.90 3/4 per gallon.

 

Oat futures ended higher across the board Monday, underpinned by speculative buying with concerns over heat and dryness in the northern Plains underpinning prices.

 

September oat futures settled 3 1/4 cents higher at US$1.95 and December oats ended 5 1/2 cents higher at US$1.99 per bushel.