October 6, 2006

 

CBOT Corn Review on Thursday: Lower on profit taking, fund selling

 

 

Chicago Board of Trade corn futures ended lower in active trade Thursday as profit taking and fund selling weighed on the market, sources said. Losses were contained in the spot month December future as bear market spread unwinding supported the nearby and pressed the deferred months, they added.

 

Overall fund selling was estimated at 9,000 contracts.

 

December corn settled 2 1/2 cents lower at US$2.71 3/4 cents per bushel, and March fell 4 1/4 cents to US$2.83 1/4. e-CBOT day session volume in December was 82,417 contracts.

 

Thursday morning's Informa crop production estimate set a negative tone for the market, said Dan Cekander, an analyst with Fimat Futures LLC in Chicago. Their number was a little bit larger than the USDA's September estimate and was not what the bulls were looking for, he said. This opens the door to ideas of a production increase from the USDA in next week's report, rather than a decline, he noted.

 

Private analytical firm Informa Economics estimated 2006-07 U.S. corn production at 11.151 billion bushels, with a yield of 155.2 bushels per acre, sources said.

 

In September, the U.S. Department of Agriculture estimated U.S. corn production at 11.114 billion bushels with a yield of 154.7 bushels per acre.

 

The USDA is scheduled to release its next U.S. corn production and supply and demand estimates next week.

 

In addition, producer selling in the country has increased after the recent price gains, Cekander added.

 

Active unwinding of bear spreading was noted by several traders as the steep loses in wheat bear spreads had corn spread traders "nervous", a floor trader said.

 

Weekly U.S. export sales were above analyst estimates but had little market impact, sources said.

 

The USDA reported weekly sales at 1.158 million metric tonnes, above the 800,000-1.0 million forecast.

 

On open auction technical charts, December remained above its major moving averages. December's 14-day relative strength index stands at 65.47.

 

Buyers Thursday included Goldenberg-Hehmeyer, which bought 2,000 July, Man Financial, which bought 1,500 December, Tenco, which bought 1,500 March, and Citigroup, which bought 600 December.

 

Merrill Lynch sold 3,000 December, Goldenberg-Hehmeyer sold 2,500 March, the USA Trading division of Man Financial sold 1,500 March, UBS sold 1,000 December, JP Morgan sold 1,000 December, and Fortis sold 800 December.

 

In options trading, Advantage futures bought 15,000 December 2006 US$2.75 calls and sold 5,000 December 2007 US$3.10 calls. Tenco bought 2,500 March US$2.80 puts and sold 5,000 March US$3.20 calls.

 

In spread trading, Rosenthal bought 2,000 December 2007-December 2006. Oat futures settled higher as light fund buying helped futures set new life of contract highs in some months, a floor source said. Hedge related selling near the highs capped the gains, they said. Oats at US$2.15 are expensive, and farmers with oats will hedge, a floor trader said.

 

December oats rose 3 1/2 cents to US$2.13 1/4 per bushel and March settled up 2 1/4 cents to US$2.20.

 

Ethanol futures settled higher in light trade. November ethanol gained 3 cents to US$1.835 per gallon and December, which didn't trade, rose 3 1/2 cents to US$1.815.