The corn market closed higher on the day on the back of the bean and crude oil rally, but off the highs set earlier in the trading session. The March contract closed almost 4 cents higher, but 5 cents off the highs. Surging crude oil prices helped push corn up to its highs, but it couldn't stop profit taking to come in and sell off the market. The highs in the corn were actually made early in the session and the market just couldn't hold the rally. Corn is a follower, not a leader but when beans rally like they did today, corn has to keep up some just to compete on acres. The corn market is very choppy, especially with this being a holiday week. Nothing has changed, corn traders are still keeping an eye on the energy markets. As expected with the holiday around the corner, volume is smaller than usual, but funds were net buyers of 4,000+ contracts. Weather remains a non-issue with conditions in So. America fine and the US corn almost completely harvested.
eCBOT markets were a little lower overnight after trading most of the night session unchanged. The corn market sold off yesterday after making highs early in the session and we could continue to see some of that this morning. Today is a short day because of the holiday and these days can prove to be very volatile. Traders pointed to profit taking in the beans that spilled over to the corn market. Taiwan bought 29,000 tones of US corn overnight and So. Korea bought 100,000 tones of US corn. As we continue to see, demand remains strong and that will support the corn market but the US is dealing with a huge corn crop. Corn is still a follower and traders that are working today will look to the crude and bean market for direction. I would look for corn to open unchanged, maybe slightly lower, and then look for direction. We got through the December option expiration yesterday, so there will be some traders looking to put on new positions if the markets move the right way, but I would expect a low volume day, but possible volatile price action.
eCBOT Overnight
Contract Last Net Change High Low
ZCZ7 380^2 -1^0 383^0 380^2
ZCH8 397^0 -1^2 400^0 397^0
ZCK8 408^0 -0^6 409^6 407^6
ZCN8 416^0 -0^6 418^0 416^0
Early Opening Calls: lower
Top News
-- Exports: Taiwan bought 29,000 mt. US Corn and 16,000 Soybeans for Jan.
-- USDA Weekly Export Sales report will be released on Friday, November 23, 2007, due to the Thanksgiving holiday.
-- Dalian May Corn futures up 13 Yuan/mt to 1736 Yuan/mt
-- eCBOT Corn Vol: 180,976; Pit Vol.: 52,239; Open Interest change: -25,760
-- Weather: 6-10 Day Forecast: Below Normal Temps. Normal to Below Precip. The Corn Belt will see showers and some snow today ending by late tonight. Friday into Sunday looks dry. Temps mostly below normal.
-- Outside markets. Energy: crude put in new high overnight at $99.29, this AM its up 20c to $98.23/bbl ; Gold $10 higher & Silver: 12.5c higher; US $ mixed vs. Euro, lower vs. Yen.
Cash Markets
-- CIF Corn off 1 to 3. LH Nov. +?? to +56, Dec. +58 to +60, Jan. +50 to +52, Feb. +52 to +54, Mar. +49 to +??, A/M +41 to +44 J/J +42 to +45
TREND:
Bull gets his turkey for Thanksgiving and the Bear gets his for Christmas. Too many looking for a strong close into the end of this week?
Ok, sell the rally in wheat unless it gets too strong. There is too much risk in old crop wheat shorts---even in spreads. Stay with the KC-Chi in new crop but the demand may just be enough to get the short in old crop. This applies to corn/wheat also.
Corn has value at 3.70 to 3.60. Be prepared to do pricing in this area. The up side of corn is looking to have more potential? It may come off the strength in outside markets but this trade feels like it can go after a test of the highs. Stayed with new crop hedges today and even added to---like to have short puts in the old crop against those sales.
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
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