October 3, 2007

 

CBOT Corn Review on Tuesday: Limit down on technical, spillover selling

 

 

Chicago Board of Trade corn futures settled sharply lower Tuesday with several months ending limit down, 20 cents lower. Pressure came on spillover selling from wheat futures, from technical selling and from a general sell-off in commodities, analysts said.

 

December corn settled 20 cents lower at US$3.48 3/4 per bushel, with March also 20 cents lower at US$3.65 1/2. A corn options trader said synthetically traded December was trading around US$3.47 at the close, indicating a slightly lower opening Wednesday.

 

Day-session trading began at 11:30 a.m. EDT due to problems with the exchange's open-auction order-routing system.

 

The market retreated on technical selling and the weakness in commodities in general, said Bill Nelson, associate vice president at AG Edwards & Sons in St. Louis.

 

Sharply lower wheat futures added to the losses as corn has benefited from wheat's recent rally to all-time highs, an E-CBOT trader said. December wheat settled 30 cents lower at US$9.22 1/2 per bushel.

 

Precious metal futures sold off sharply and crude oil was weaker, with a stronger U.S. dollar adding to the overall commodity sell-off, Nelson said.

 

On daily open-auction technical charts, December corn gapped open lower, falling below support at US$3.58 3/4 per bushel.

 

Continued good harvest progress and talk of favorable yields added to the downdraft in prices, a commission house analyst said. The U.S. Department of Agriculture reported that 31% of the U.S. corn crop was harvested as of Sept. 30, within analyst estimates and above the five-year average of 20%.

 

Commodity fund selling was noted in open-auction activity, with selling estimated at 8,000 contracts.

 

A private crop forecaster's production estimate released late Monday had little impact on prices given the amount of good yield reports this fall, a trader said. FC Stonnee estimated the 2007-08 corn crop at 13.455 billion bushels, with a yield of 157.4 bushels per acre. In September, the USDA estimated the crop size at 13.308 billion bushels and a yield of 157.4 bushels per acre.

 

News late Monday that VeraSun, a publicly traded ethanol company, was suspending construction on a 110-million-gallon ethanol plant in Indiana had little impact on price direction Tuesday but helped underpin ideas that corn demand from ethanol producers would be reduced from earlier projections, an analyst said.

 

Price direction on Wednesday will depend on the amount of follow through seen in overnight trade and any fresh news, the E-CBOT trader said.

 

On daily technical charts, electronically traded December corn settled below its major moving averages and at its lowest level since Sept. 13.

 

In open-auction trading, commodity fund selling was estimated at 8,000 contracts.

 

In options trading, MF Global bought 1,000 December US$3.40 puts and sold 1,000 December US$3.70 calls. Fortis bought 1,000 December US$3.60 puts.

 

Oat futures ended sharply lower as fund and technical selling pressured prices, though thin commercial-related buying was noted near session lows, an analyst said.

 

Dec oats settled 13 cents lower at US$2.76 per bushel.

 

Ethanol futures settled higher in thin trade. Oct ethanol gained 3.9 cents to US$1.585 per gallon and Nov rose 2.9 cents to US$1.568.