August 9, 2006

 

CBOT Corn Review on Tuesday: Declines on favorable midwest weather

 

 

Chicago Board of Trade corn futures finished on the defensive Tuesday as weather favorable for crop development kept the market on the defensive, floor sources said.

 

September declined 4 cents to US$2.35 3/4 per bushel and December also fell 4 cents, to US$2.53; e-CBOT volume in December was 27,578 contracts.

 

"It's simple, the weather is bearish," said Vic Lespinasse, of AG Edwards & Sons. The forecast hasn't changed in the past two days and the market has reflected the forecasts, he added.

 

It rained overnight in parts of the region and rain is expected over the next several days with the lack of above- normal heat, a floor analyst said.

 

Technical selling added to the losses, a commission house broker said. December gapped open to the downside for the second straight session on open auction-only charts and settled at its lowest level since July 26.

 

Light fund selling also applied price pressure, a floor source said. Fund selling was estimated at almost 2,000 contracts.

 

Ideas are growing that corn yields will increase due to the favorable weather, Lespinasse added.

 

The market is getting ready for Friday's USDA reports with some weak long position holders exiting the market, the floor analyst said.

 

In a survey of 22 analysts, the average 2006-07 corn production estimate was 10.795 billion bushels, slightly higher than the U.S. Department of Agriculture's 10.740 billion estimate. The average yield estimate was pegged at 149.9 bushels per acre, slightly higher than the 149.0 bushels reported in July. The August report will be the first filed survey taken of the crop.

 

In a survey of 15 analysts, the average of 2005-06 corn ending socks estimate was 2.041 billion bushels, 21 million lower than the 2.062 estimated by the USDA in the July supply and demand report. The average ending stocks estimate of the 2006-07 was 1.105 billion bushels, slightly above the 1.077 billion forecast by the USDA in July.

 

The USDA is scheduled to release its August crop production report Friday at 7:30 a.m. CDT.

 

Monday afternoon's weekly crop progress report had little market impact. The USDA reported 57% of the U.S. corn crop was in good-to-excellent condition, up one percentage point from the previous week. Analysts had been anticipating a 1 to 2 percentage-point swing either way from last week. Conditions improved in most major corn states, except in Missouri, which fell seven percentage points in the good-to- excellent category.

 

Buyers Tuesday included JP Morgan, which bought 2,000 December, Rand Financial bought 1,200 December, and ABN Amro bought 500 December.

 

Prudential sold 500 December, Citigroup sold 500 March and 200 December, and Man Financial sold 400 September, 400 December and 300 March.

 

Fund selling was estimated at 1,800 contracts.

 

Oat futures finished at mostly lower levels as spillover from corn and wheat weighed on the market, a commission house analyst said. Light commercial-related buying near the lows of the session helped limit the declines, he added.

 

September oats settled 1/2 cent higher at US$1.81 1/2 per bushel while December declined 3/4 cent to US$1.88 1/2.

 

Ethanol futures settled lower in light activity. August ethanol slipped 8 cents to US$2.51 cents per gallon and September lost 3 cents to US$2.50 1/2.