The corn market was lower on Friday on profit taking after the run up during the week before the release of the USDA report on Friday. The corn moved higher last week in anticipation of a bullish USDA report which it got in lower production, but one trader said he thought the market was looking for a lower stocks number than was released. The ending stocks number was lower which is bullish, but it significantly higher than last year so you can't get too excited. The corn market closed 2 ¾ lower, well off the lows after a late rally in beans and the outside markets helped support the corn market. Corn is still a demand market and it will be hard to break corn significantly. Volume was very heavy with a lot of spread volume as traders are moving their positions out of the Dec07. Traders still looking at the outside markets because there is little to no new news out about the corn and the grain markets are considered an inflation hedge.
eCBOT market was lower overnight as the outside markets are lower and the US$ is stronger. The December contract closed 5 ½ lower overnight. Not surprising to see a lower Monday trade after a Friday crop report, especially with gold down over $20 and crude oil down over $1.50. No new corn news over the weekend, so traders will look to the other grain markets and the outside markets. A lot of talk that the lower US$ may have found a bottom and that there will be a recovery which will cause some liquidation of the commodity markets to reduce exposure, not completely cover their long positions. Overall, there seems to be plenty of corn to go around right now and higher prices are not stopping users, either feed, ethanol, or exporters from continuing to buy corn. The corn market is in its final stages and this will create a lull in the corn market unless there is outside news to move the market. Look for the corn market to open lower and test to see if there is any support. The metals continue to go lower this morning after being a lot lower overnight and the crude oil is down over $1.50.
eCBOT Overnight
Contract Last Net Change High Low
ZCZ7 381^2 -5^4 385^4 380^0
ZCH8 397^6 -6^2 402^6 397^0
ZCK8 408^2 -5^4 412^2 407^0
ZCN8 416^0 -6^4 421^6 415^0
Early Opening Calls: 5 to 7c lower
Top News
-- Dalian Corn futures settled 2 Yuan/mt higher at 1776 Yuan/mt in overnight trading
-- eCBOT Corn Vol: 232,893; Pit Vol.: 62,937; Open Interest change: +4,193
-- Weather: 6-10 Day Forecast: Normal to Below Temps. Normal to Below Precip. The Corn Belt will see scattered showers and thunderstorms today and Tuesday.
-- Outside markets. Energy: lower $1.43 at $94.91/bbl, products lower; Dec Gold sharply lower off $25 & Silver: off 64c to $14.90; US $ sharply higher vs. Euro, sharply lower vs. Yen.
Cash Markets
--CIF Corn steady. Nov. +57 to +59, LH Nov. +58 to +60, Dec. +60 to +63, Jan. +49 to +52,
Feb. +49 to +52, Mar. +50 to +52, A/M +40 to +43
TREND:
There is no doubt that the weak $US has been instrumental in much of the speculative interest in owning commodities.
There has been all too much correlation to the trade. There are some signs that the break in the $US has gone far enough. If this trade starts to stabilize and rally some, it could lead to a wholesale long liquidation of some of the heavily overbought futures trade in commodities without a corresponding bullish fundamental outlook. Take note if long crude oil or derivatives.
Wheat got a bit of a bounce off the important 7.50 price level in Chi. There is also a bit of a weather trade developing in minds of hard wheat traders. Chi is a dead duck---want to be bear spread the Z8/N8 spreads in Chi looking for the major increase in acres coupled with very good growing conditions so far to keep pressure there. This spread has bounced some this week on Bear spreading of N8/Z7. Take advantage.
Corn continues to be just a little stronger than I anticipated. The $4.00 level appears to be a magnet. Some users just have not been able to get the ownership wanted coming out of harvest. Firming basis levels have led to some of the gains in futures. We stepped into the first new crop 08 hedges at 4.35 CZ8 this week. This is not without fear but we have not sold any beans yet---that market should still be a leader to the top-side
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.
