November 23, 2010

CBOT corn falls for second consecutive session
 

US corn futures dropped for the second consecutive session on Monday (Nov 23) as market participants lessened their risk exposure by removing money off the table.

Corn for March delivery, the most-active contract, closed down by US$0.055, or 1.1%, at US$5.29 a bushel at CBOT.

Market participants, who had built up a big long position in corn futures, were booking profits as month-end and year-end approached, analysts said. Profit-taking has already assisted in pulling down prices by nearly 15% from a 27-month high hit recently this month.

Noncommercial speculative funds in the week ended on November 16 lessened their net long position in the market by 47,109 contracts to 292,484, according to a supplemental weekly Commitments of Traders report issued on Friday (Nov 19) by the Commodity Futures Trading Commission. Long positions are speculations that prices will increase.

"Funds continue to cut their massive long-held positions on grains," said an analyst.

Speculative funds have now lessened their long position for two weeks in a row. More reductions should be expected, the analyst said.

"We're seeing a little shake-out here into the end of the year," said another analyst.

Futures have increased by more than 60% since June on fears the US harvest would not cater to high global demand. The US is the biggest producer of corn globally and others depended on it to keep world markets adequately supplied.

The market may have attained highs for the year as supply fears are mainly factored in to prices, analysts said. However, high export demand and renewed buying from speculative funds could result in a new rally in 2011, they said. Speculative funds buy and sell commodities for profit but do not have an interest in taking delivery of physical products.

"It is not out of the question that longs may be re-established early next year, but at the present time there is little reason to hold them if there is a profit that can be locked in," said the third analyst.
In other news, strength in the US dollar increased pressure to corn futures as it makes US grains more costly for buyers from other countries, traders said. Weekly US corn export inspections of 24.4 million bushels, reported on Monday (Nov 22) for the week ended on November 18 were less than expectations of 25-33 million.