November 1, 2007

 

CBOT Corn Review on Wednesday: Higher on crude oil rise, technical buying

 

 

Chicago Board of Trade corn futures ended moderately higher Wednesday but well off session highs, boosted by sharply higher energy futures as crude oil rallied to another new all-time high.

 

December corn gained 5 1/4 cents to US$3.75 1/2 per bushel.

 

"If you look at a corn futures chart over the past two weeks and put it next to a chart of crude oil the correlation is pretty strong," said Dan Basse, president of AgResource Co. in Chicago. The crude oil market started to rally and corn followed it up, he said.

 

"The rally in corn is all part and parcel of what is going on in world commodity markets. Corn is a bio-crop and it tends to follow energy prices," said Basse.

 

Speculative and technical buying added to the gains, a commission house analyst said. Commodity fund buying was estimated at 8,000 contracts. However, there was some light index fund rolling out of nearby December and into December 2008 helping trim the gains with outright selling in the deferred contracts adding mild pressure near the close, the trader added.

 

On daily technical charts, electronically traded December settled above its 200-day moving average and traded an "outside day," above and below the range established Tuesday.

 

Market direction Thursday will depend on price direction in energy markets, the level of the U.S. dollar against other major currencies and how the Fed's decision on interest rates is interpreted, an analyst said.

 

After the close of trading, the Federal Reserve announced it cut the Fed funds rate 25 basis points to 4.5%.

 

In options trading, FC Stonnee bought 2,000 December US$4.00 calls and sold 2,000 December US$3.55 puts.

 

Oat futures settled higher as fund buying in December and spillover from the rally in commodities in general supported prices, a trader said. Technically, the market is above its major moving averages and that is supporting oats as well, the trader said.

 

December oats settled 4 3/4 cents higher at US$2.87 3/4 per bushel and March, which set a new life-of-contract high, ended up 4 1/4 cents to US$3.01.

 

Ethanol futures ended higher. November ethanol gained 4 cents to US$1.79 per gallon and December also rose 4 cents, to US$1.75.

 

In other corn news, the U.S. Department of Agriculture is scheduled to release the weekly export sales report Thursday at 8:30 a.m. EDT for the week ended Oct. 25. Analysts forecast sales between 700,000-1.2 million metric tonnes.