The corn market closed higher Wednesday on the back of the limit up move in the wheat market, but it fought the big sell off in the crude market till late in the day when wheat finally dragged it higher. The March contract closed 3 ¾ higher. There really wasn't any new news out about the corn market, so the outside markets were the driving force. The crude oil was higher early before the release of their weekly production numbers which caused the market to sell off. Crude oil was over $3 late in the trading session. Wheat was limit up today as rumors swirl about how much wheat is going to be lost because of the frost trouble last week. There was early technical selling in the corn market did not find any follow through and traders pointed to speculative buying on the close because the market wasn't able to push the downside. Volume was moderate and funds were net buyers of 4,000+ contracts by the end of the session. Keep in mind that the Friday is First Notice Day in the December contract, so we could see further liquidation of the December contract keeping pressure on the corn market. So. Korea announced on Tuesday night that they bot another 120, 000 tones of US corn.
eCBOT market was higher overnight on heavy volume as the corn continued the rally that started late in the session on Wednesday. The March contract closed 1 ½ higher overnight as we continued to see the grains rally and the outside markets higher. Pipeline explosion in MN pushed crude up over $4 overnight before setting back some early this morning. Weekly export sales were strong again this week at 1.84 mil tones with the analysts estimating 1.3 - 2.0 mil. This week's sales don't blow away the estimate's, but the estimate's are a lot higher than past weeks. This is still a big number and reinforces the market perception that the demand for US corn is strong and not going anywhere anytime soon. The 1.84 mil tones is unchanged from last week, but 38% above the 4 week average. Nothing has changed in the corn market today as corn is still a follower and will look to the other markets for direction. The Chinese gov't announced they will sell 2.0 mil tones of corn from state reserves to try and keep domestic prices under control, but experts say this will have a temporary affect on the market as demand remains strong and they had a smaller harvest this year. Also, talk out of China that they will increase ethanol production to help with fuel shortages. China is the 800 lb gorilla and if they come into the world market to buy corn, watch out, you have seen what it has done to the bean and bean oil markets lately. Corn should open higher inline with the overnight closes, maybe a little stronger, but it will look to the other grain markets for direction. Watch out for wheat, very volatile.
FIRST NOTICE DAY IS TOMORROW. EXPECTED LARGE DELIVERIES.
eCBOT Overnight
Contract Last Net Change High Low
ZCZ7 389^0 1^6 389^2 386^0
ZCH8 406^0 1^4 406^6 403^0
ZCK8 416^4 1^4 416^4 414^0
ZCN8 425^0 1^0 425^4 422^2
Early Opening Calls: 2-3 higher
Top News
**USDA Corn 07/08 Export Sales Net: 1.841 mln mt; 08/09 Net: 100 mt; expected 1.2-1.8 mln mt
-- Chinese Nat'l Grain & Oils center suggested China will sell 2 million mt of state reserve held Corn in effort to help control feed meal prices
-- Brazil gov't estimates 2007/08 ethanol production at 20.9 Bln liters down vs. 21.3 Bln liters in August forecast
-- Position day for CBOT December contracts is Thursday with first notice on Fri AM.
-- Dalian Corn futures May contract fell 8 Yuan overnight to 1774 Yuan/mt
-- eCBOT Corn Vol: 136,420; Pit Vol.: 57,772; Open Interest change: -26,754
-- Weather: 6-10 Day Forecast: Above Temps West, Below East. Below Normal Precip. The Corn Belt looks dry today and Friday.
-- Outside markets. Energy: crude up sharply $2.30 to $92.92/bbl after explosion in Canada oil field ; Gold $1.20 higher & Silver: of 3c to $14.30; US $ unchanged vs. Euro, higher vs. Yen.
Cash Markets
-- CIF Corn up 2 to 4. Nov. +42 to +49, Dec. +50 to +52, Jan. +46 to +50, Feb. +51 to +54, Mar. +50 to +53, A/M +40 to +44 J/J +42 to +45
TREND:
The short in old crop wheat could very well be in trouble. Much of this gain has been spread liquidation. Should be a major drop in open interest in the AM. New crop short hedges have to stay in place.
Corn prices tugged along with wheat. Could pull this market into a more positive technical condition? Long-term charts are positive. I continue to look for a deeper correction but will have to take note if last weeks highs come out.
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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