December 17, 2009

 

CBOT Corn Review on Wednesday: Ends up; late surge of fund-buying

 

 

A late burst of fund-buying and support from soy pushed Chicago Board of Trade corn futures higher on Wednesday.

 

March corn ended up 2 3/4 cents, to US$4.10 1/4 per bushel, and May corn ended up 2 3/4 cents, to US$4.21.

 

The market was lower most of the day, but late buying pushed prices higher late. Traders said there was no clear impetus for the climb. A couple traders attributed the rally to fund-buying. Funds bought an estimated 3,000 contracts.

 

Index fund rebalancing, the expectations that those funds could buy 60,000 corn contracts as the calendar flips to 2010, has been seen as a key supportive facto in the market. A trader said that was likely a factor Wednesday, although he added that whether funds are already buying and how much they will buy is up for debate.

 

Any estimates on how many contracts those funds will buy is "a moving target," a trader said--they'll buy more if prices are lower, less if prices climb.

 

The market is widely seen as being rangebound, and is struggling to break above the US$4.10 to US$4.15 area in the nearby contract. Weak demand, both for feed and exports, have capped the market's upside potential.

 

But corn had support Wednesday from soy, which continue to have strong demand.

 

"The market seems to want to inherently break, but beans aren't going to let it, and sellers are going to be wary until the beans make a decisive move," says John Kleist, broker/analyst with Allendale.

 

Kleist said the market is hovering above a "bull defense area" in which there are several major moving averages. In the March contract, the 10-day, 20-day, 50-day and 200-day moving averages are all between US$3.96 1/2 and US$4.02 3/4.

 

A trader said with the market's inability to move past resistance levels, "this thing feels toppy." He said fund managers were "sitting on their hands" awaiting Wednesday's meeting of the Federal Reserve Board and its potential impact on the dollar.

 

Another trader said the meeting appeared to give a boost to the dollar, which could be bearish for commodities in the overnight session.

 

CBOT oats ended higher. March oats ended up 2 1/4 cents, to US$2.62 1/4 per bushel, and May oats ended up 2 cents, to US$2.70 1/2.

 

Ethanol futures were mixed. January ethanol ended down US$0.011, to US$1.854 per gallon, and March ethanol settled up US$0.004, to US$1.826.