July 11, 2006

 

CBOT Corn Review on Monday: Up on weather forecasts, funds, technicals

 

 

Corn futures ended moderately higher Monday, but below levels reached earlier in the session as supportive overnight weather forecasts, heavy commodity fund buying and technical buying lifted prices, sources said.

 

The July contract settled 6 3/4 cents higher at US$2.47 3/4 cents per bushel and December also rose 6 3/4 cents, to US$2.72 1/2.

 

Supportive overnight weather forecasts led to stronger prices on the opening with heavy fund and technical buying extending the gains, a floor trader said.

 

The December futures traded at their highest level since June 12.

 

Once December traded above US$2.72, it appeared that computer-based technical buying kicked in, a floor analyst said.

 

However, conflicting midday weather forecasts over the amount of rain the U.S. Midwest would receive of the next several days limited additional buying interest and led to light profit-taking, a commission house analyst said. The funds bought over 15,000 contracts and the market was not that much higher, a floor trader said.

 

There were no major changes in the midday forecasts, said John Dee, a meteorologist and president of Global Weather Monitoring. Over the next two to three days the Midwest should see rainfall of 1/2 inch to 1 inch with coverage of 75%-80%, before giving way to a heat ridge bringing above-average temperatures, with the core of the heat in the western Midwest, he said.

 

Dee expects possible triple-digit temperatures in Omaha, Neb., mid to high 90s in Des Moines, Iowa, and temperatures above 90 degrees in Chicago by the weekend before the ridge breaks down by early next week.

 

"If you drew a line from Omaha to Rochester, Minnesota, to Green Bay-Milwaukee (area), most of the heat will be north and west of that line," Dee said, increasing farther north and west.

 

Reports that the head of Pimco, a large money management firm, said that corn futures were undervalued were mentioned by a floor source as psychological support.

 

A floor analyst noted the supply and demand report due Wednesday as a supportive factor as well, with traders unlikely to sell aggressively ahead of the report.

 

An average of 15 analysts surveyed estimate 2005-06 ending stocks at 2.104 million bushels, 72 million bushels lower than the 2.176 billion bushels the U.S. Department of Agriculture estimated in June.

 

An average of 16 analysts surveyed estimate 2006-07 ending stocks at 1.266 billion bushels, 175 million bushels higher than the 1.091 billion estimated by the USDA in June.

 

Export inspections were released during the session and were 32.780 million bushels, below the 36 million to 45 million bushels expected by analysts.

 

On technical charts, December corn settled above its major moving averages.

 

Buyers Monday included JP Morgan, which bought 4,000 December, RJ O'Brien bought 2,500 December, ABN Amro bought 2,000 December, Man Financial bought 1,500 December, and Goldenberg-Hehmeyer bought 1,400 December.

 

Sellers on Monday included UBS, which sold 1,000 December, Rosenthal sold 800 December, Fimat sold 700 December, JP Morgan sold 500 December, Rand sold 500 December, and Merrill Lynch sold 500 December.

 

Overall commodity fund buying was estimated at 15,200 contracts.

 

Oat futures settled sharply higher as technical and fund buying pushed prices up near the close, a floor trader said. Both the July and September contracts set new life-of- contract highs.

 

July oats settled 12 1/4 cents higher at US$2.29 1/4 per bushel and December gained 6 cents to US$2.04 1/2.

 

Ethanol futures settled unchanged to lower in modest activity. August ethanol declined 11 cents to US$2.73 per gallon and September futures settled unchanged at US$2.40.

 

On Monday afternoon, the USDA is scheduled to release the weekly crop progress report, Traders expect a one to three percentage-point decline in the crop's good-to-excellent rating. Last week, 68% of the U.S. corn crop was rated in good-to-excellent condition.