November 12, 2005

 

CBOT Corn Review on Friday: Firms as market exhausts selling

 

 

Chicago Board of Trade corn futures rose slightly Friday on a bit of technical momentum as early selling dried up and turned into fund short covering, sources said.

 

Corn also found support from fund and local buying, spread trading and spillover strength from rallying soybean futures.

 

Funds were net buyers of an estimated 1,000 contracts.

 

Dec corn settled 1 3/4 cents higher at US$1.95 1/2, Mar rose 1 3/4 cents to US$2.09 3/4 and May gained 1 1/2 cents to US$2.17 1/4 a bushel.

 

"Once again we just couldn't do anything with it once we set the new contract low as far as generating much follow-through selling," said Shawn McCambridge, senior grains analyst at Prudential Financial in Chicago.

 

Corn then began to firm as prices pierced overhead resistance at US$1.95 1/2, which triggered fund short covering, he added.

 

McCambridge attributed the firmer prices to the acquired technical strength once prices breached resistance and reversed course.

 

Considering the market received bearish news of the second-largest crop on record and growing ending stocks on Thursday, producing new rounds of contract lows both Thursday and Friday, prices are behaving rather well, he noted.

 

"So I think that's kind of an indication that we're starting to exhaust the selling," McCambridge said, adding that a bottom has likely been achieved for the short term.

 

Though the market has a seasonal tendency to weaken as the holidays draw nearer, "between now and delivery the bottom has probably been set," he said.

 

Spread trading was active as the December/March showed indications of tightening, providing new opportunities for some traders, McCambridge said.

 

Fimat, Tenco and O'Connor spread a total of 11,000 December/March contracts from 13 1/2-14 cents. On the flip side, Fimat and Calyon Financial each spread 3,000 March/December and O'Connor did 2,000 of the same.

 

ABN Amro bought 700 December; Fimat bought 500 March; Refco and Prudential Financial each bought 400 December; Tenco bought 200 May; and ADM bought 200 December.

 

Fimat sold 1,000 December, while Cargill and Tenco each sold 200 December. R.J. O'Brien and CIS each sold 200 March.

 

Technically, December corn finds resistance at Friday's US$1.96 high. Moving-average resistance is met near US$1.97, then US$2.01. Support is uncovered at Friday's US$1.93 1/4 contract low.

 

Ethanol for December delivery was unchanged at US$1.99 1/2 and January was steady at US$1.93 a gallon.

 

December oats were up 3/4 cent to US$1.67 3/4 a bushel.