The corn market sold off again on Thursday as weather forecasts continue to show good rains across the eastern corn belt, thus reducing the dryness and increasing the topsoil moisture. As we have been saying, once the weather premium was taken out of the corn market when it started raining, the market would sell off, but it wouldn't completely breakdown because demand remains strong. On top of the rain forecast, the National Weather Service reduced the chances of the La Nina developing this summer till later in the summer, after the main growing season, reducing the concern of a hot/dry summer in the US corn belt. Besides the weather news, there is very little other news about the corn market. Export sales were strong again yesterday morning and remain ahead of last years pace. There was some option trading that helped pressure futures as traders were buying puts and selling calls. Also, July option expire at the end of the day today, so that could create some volatility. Technicians point to the $4.00 level as key support and the market found some sell stops when the December traded below that level.
eCBOT market was lower again overnight as central IL and IN received very good rains overnight and the forecast calls for more rain today before warming up the beginning of the week. Is there anything a corn crop likes better is moisture followed by warm weather? In some areas, you can probably watch the corn grow next week. On top of the beneficial rains, some forecasts are reducing the chances of a blocking ridge. One forecaster reminded traders of the drought in IL a couple of years ago when the rains were below average, but temps weren't excessive and the areas received timely rains. Hot/dry conditions later in July could still hurt the crop, but today, most areas are receiving rains and except for some hot weather the beginning of next week, the weather remains conducive to growing corn. So. Korea bot corn from So. America and China overnight, 55,000 tones and there is some talk about China not importing corn until next year because of the government restricting use by corn processing companies. Corn will open lower today and then the market will see how far it is going to break before buying comes into the market. July option expiration will play some part in today's activity as there is a lot of open interest at the 380 strike price. Professional option traders will try and put in a top on the option volatility which usually happens after the market feels the crop is made and we might have started to see that as a big fund sold 5000 Dec 450 calls yesterday. Corn will be lower today, but how much farther it goes will depend on buying coming into the market because the selling will be there today.
eCBOT Overnight
Contract Last Net Change High Low
ZCN7 380^6 -4^2 387^6 380^2
ZCU7 391^0 -3^6 397^6 390^0
ZCZ7 395^2 -3^6 401^6 394^2
ZCH8 404^2 -4^0 410^2 404^2
Early Opening Calls: 3 to 5c lower
Top News
**Intercontinental Exchange plans to buy Winnipeg Commodity Exchange for C$40 mln
-- Export News: South Korean corn processor purchased 55k tons of corn, price = $243/ton for South American, $233/ton for Chinese, acc. to traders, with shipment set for late September
-- Brazil 2007 Corn exports have already hit 4.0 mmt. in the first half of the year equal to all of Brazil's 2006 Corn exports.
-- Due to demand of corn for ethanol, price of cattle feed has more than doubled from $4 to $8.50 per 100 lbs. from last June until now, according to industry sources.
-- USDA Cattle On Feed released at 2:00 pm CST. Analyst expect marketings during May at 98%, while placement during May at 110% of year ago.
-- CBOT plans June 28th Oats industry meeting to discuss oat futures contract performance, delivery locations & instruments, storage charges.
-- White House spokesperson fingers Brazil & India as blocks during Doha-round trade talks held in Germany & expressed disappointment that an agreement was not reached
-- Dalian Corn futures lower overnight.
-- eCBOT Vol: 187,763; Pit Vol.: 59,219; Open Interest change: -6,312
-- Weather: Above Temps. Below Precip East, Normal to Above Precip West. Scattered showers in Corn Belt over the weekend
-- Outside markets. Energy complex lower; Gold & Silver both higher; US $ higher vs. Yen, lower vs. Euro
Cash Markets
--CIF Corn: June +32 to +36, July +37 to +39, LH July +40 to +44, Aug. +38 to +41, Sept.
+37 to +41, Oct. +37 to +40, Nov. +38 to +42, Dec. +43 to ??
TREND:
Wheat held against the other markets even if it did not extend the gains after the initial round of buy stops. The wheat gains on corn have taken the spread into highs seldom seen. However, when looking at the flat price levels, the ratio of wheat to corn is not that far away from normal---high but not abnormal
Look for the weather forecast to have slightly positive bias for night trade. But wheat will continue the leader in these markets
One of the tendencies for wheat is for that market to leave trade behind. There will not be a "good" buying opportunity offered. We will have to live with the 10 to 15 cent inter-day breaks like we saw today.
If you have any questions, or if you would like to discuss specific trade recommendations on any markets, contact me directly.
Jim Riley
Linn Group
877-787-6278
Futures trading involves substantial risk of loss and is not suitable for all investors. Past performance is not necessarily indicative of future trading results. Trading commentary and analysis is based on information taken from trade and statistical services, news services, and other sources which we believe to be reliable. We do NOT warrant that such information is accurate or complete, and it should NOT be relied upon as such. Our policy is to publish market research that is objective, clear, fair, and not misleading. Trading commentary and analysis reflects our good faith judgment at a specific time and is subject to change without notice. There is no assurance that the advice we give will result in profitable trades. All trading decisions will be made on a strictly unsolicited basis by the account holder.
