December 29, 2009

 

CBOT Corn Review on Monday: Up on fund-buying, weather, technical strength

 

 

Harsh winter weather, outside market support and technical strength pushed Chicago Board of Trade corn futures higher Monday.

 

March corn ended up 7 1/2 cents at US$4.16 a bushel and May corn ended up 7 1/4 cents at US$4.26.

 

The market was higher all day, trading within a tight five-cent range, and was led by wheat and soy, which both surged. Strength in wheat and soy was attributed to short-covering and technical buying, which were factors in corn as well.

 

The nearby March corn contract has climbed above key major moving averages, and a couple of analysts said the market appeared to be on the verge of a breakout to the upside.

 

That has prompted some traders to exit their short positions, analysts said.

 

The market also had support Monday from the heavy snow that hit the U.S. Midwest over the weekend, which slowed grain movement, strengthened basis and heightened concern about the more than 500 million bushels of corn still in the field.

 

The unharvested corn represents at least one-third of the projected 2009-10 U.S. carryout, analysts said.

 

"That's probably in the mind of all the traders and end-users," said Jason Britt, president of Central State Commodities.

 

Some analysts said cold temperatures were also supportive, as it could boost the amount of feed that shivering livestock need to consume. Demand in general is seen as improving, as some traders point to strong weekly export sales the past couple weeks.

 

A floor trader said the main factor in the day's climb, however, was "money flow." He noted that the dollar was soft and crude oil was firm, and that sentiment that index funds are going to buy corn as part of their rebalancing to start the new year has given the market psychological support.

 

"People are either front-running it, or (index funds) are already stepping in here," the trader said.

 

Britt said the index-fund rebalancing could be a "buy the rumor, sell the fact" situation, and that the actual boost to corn could be disappointing.

 

Funds bought an estimated 5,000 contracts Monday.

 

CBOT oats futures ended higher. March oats ended up 5 cents at US$2.65 a bushel and May oats ended up 5 cents at US$2.73 1/4.

 

Ethanol futures were higher. January ethanol ended up US$0.037 at US$1.916 a gallon and March ethanol ended up US$0.033 at US$1.882.