December 27, 2007

CBOT Corn Review on Wednesday: Rises on soybeans, weather, fund buys

A grain market wide rally lifted corn prices Wednesday at the Chicago Board of Trade, as forecasts for dry weather in the Southern Hemisphere and investment-type buying were catalysts for strength.

Most-active March corn rose 8 1/4 cents a bushel to settle at US$4.52 1/4.

Corn started firmer, as expected, lifted by gains seen across the board. Corn jumped on the rally in soybeans, as the oilseed was the dominant market in Wednesday's action. The market gapped higher on day-only technical charts after Monday's inside trading day. March corn proceeded to take out Friday's contract high of US$4.48 a bushel with the rally. Wednesday's high of US$4.55 is the current contract high.

Long-range weather forecasts for South American weather, particularly in Argentina, buoyed prices. While rains are falling in agricultural regions now, the outlook for next week suggests dry weather will return, along with hot temperatures, meteorologists said, stressing developing crops.

A bullish technical-chart picture and speculative buying were also the engines behind corn's rally as the race for acres with soybeans continues. With soybeans trading into the US$12 level, corn prices need to keep up to encourage farmers to plant the grain versus the oilseed, market participants said.

However, some analysts don't completely agree with the acreage-race support for corn. "There are huge amounts of investments going into grains," said John Kleist of Kleist Ag Consulting. "Plus there's anticipation of more money coming in; it's tough to put a dollar amount on what the value of the market is."

Corn has benefited from some index-related money ahead of commodity index reweightings occurring early next year. Some indexes, like the DJ-AIG commodity index, have slightly raised their corn weightings from 2007's initial levels.

Absent significant news, fund buying has been a feature, several analysts said, with late-day pit-traded fund purchase totals about 7,000 contracts. Buyers of note included Fimat buying 6,000 March, Man Financial buying 400 March, and ADM, JP Morgan, Tenco and SA Inc., each buying 200 March.

Earlier Wednesday the U.S. Department of Agriculture noted two daily corn sales, with 110,000 metric tonnes sold to both unknown destinations and South Korea for the current marketing year. Export inspections for corn were 46.882 million bushels versus 50.218 million bushels a week ago. This was at the top end of analyst expectations.