October 13, 2007

 

CBOT Corn Review on Friday: Strong gains after supportive USDA report

 

 

Chicago Board of Trade corn futures settled with moderate gains Friday, boosted by short covering and technical buying after the U.S. Department of Agriculture estimated corn production well below the average analyst estimate.

 

December corn gained 7 1/4 cents to US$3.51 per bushel.

 

"Corn fundamentally and technically had people leaning to the negative side ahead of the report, and when the production estimate was lower than expected, it led to short covering with technical buying adding to the gains," said Don Roose, president of U.S. Commodities in West Des Moines, Iowa.

 

The USDA pegged 2007-08 corn production at 13.318 billion bushels, up 10 million bushels from September but well below the average analyst estimate of 13.459 billion.

 

After Friday's numbers, the trade's confidence in the theory that big crops get bigger is not as high as it was before the report, said Roose.

 

Sharply lower wheat futures helped keep a lid on corn prices. December wheat settled 25 1/2 cents lower at US$8.57 1/2. Corn also drew some support from the unwinding of soybean-corn spreads, an E-CBOT trader said. Soybean futures have rallied in recent sessions on ideas that 2007-08 ending stocks would fall below 200 million bushels, and when it didn't happen, people exited their soybean-corn spreads, the E-CBOT trader said.

 

A larger-than-expected increase in 2007-08 corn ending stocks also helped limit the upside, a trader said. The USDA pegged 2007-08 ending stocks at 1.997 billion bushels, well above the 1.675 billion estimated in September as well as the average analyst estimate of 1.959 billion.

 

Strong weekly export sales provided underlying support with sales at 2.320 million metric tonnes for the week ending Oct. 4, well above the 700,000-1.1 million forecast by analysts.

 

In open auction trading, Tenco bought 1,700 December, and MF Global bought 1,000 December. Penson GHCO sold 1,500 December.

 

Commodity fund buying was estimated at 8,000 contracts.

 

In options trading, MF Global bought 5,000 December US$4.00 calls and Iowa Grain sold 1,000 November US$3.30 puts.

 

On daily technical charts, electronically traded December had an "outside day", with the high and low above and below the previous day's trading range.

 

Oat futures settled modestly higher, bolstered by light commercial buying in March and thin spillover from stronger corn futures, an analyst said.

 

December oats settled 2 1/4 cents higher at US$2.77 per bushel.

 

Ethanol futures ended slightly higher. November ethanol gained .005 cent to US$1.575 per gallon and December also ended up .005 cent to US$1.575.