The corn market was higher on Wednesday as we saw wheat up almost 40 cents synthetically, beans up 16 cents and crude oil up almost $4.50. Corn is still a follower right now, but there is some underlying bullish factors including Goldman Sachs announcing a price target of $5.30 from $4.40 for Dec08 corn and the energy bill which should add some ethanol mandates. If the energy bill does pass, the US will have to come up with more corn from somewhere or reduce feed and exports. The Goldman Sachs announcement is just that, an announcement, but they still carry a lot of weight in commodity arena and from where today's corn prices are, this offers speculators opportunity. Investment funds have been the big story the last 1 ½ years in the grain markets, so when they talk, the market listens. We could be looking at the beginning of a rebalance of some of these funds as the price target on wheat wasn't as big as the price targets in corn and beans. Crude oil was up almost $4.50 and that helped support the corn market. Volume remains very heavy and funds were net buyers of 11,000 contracts. Weather in Argentina remains a non-factor as they are almost 85% planted and have received some rains to get the rest of the crop planted.
eCBOT market was unchanged/slightly higher overnight as traders try and decipher if the corn market is going to keep extending into new highs or if there is going to be a set back. Export sales this morning were good, not great, but that was expected. Analysts estimated the export sales at 1.1 to 1.3 mil and actual sales were 1.155 mil. This number will probably be washed under the rug and traders look to other markets for direction and to see what type of fund activity we have today. The announcement by Goldman Sachs yesterday announcing price objectives for corn, wheat, and beans has had the desired affect of pushing up the corn and bean prices. We look for the corn market to open higher today but it may have trouble extending gains as it gets into over bought conditions technically. Technicians point to some price objectives for corn and the rally may take a break after reaching almost 6 month highs again yesterday. The investment funds are the wild card as they have been in buying corn the last couple of days and some traders will tell you the rally was as much a lack of selling than huge buying. Corn is still a follower even with the positive fundamental data
eCBOT Overnight
Contract Last Net Change High Low
ZCH8 433^6 0^4 434^6 431^4
ZCZ7 416^6 0^0 417^2 415^0
ZCK8 444^4 0^2 445^0 442^2
ZCN8 450^4 0^6 451^0 448^4
Early CBOT Grain Complex: Corn Steady
Top News
**USDA Corn 07/08 Export Sales Net: 1.155 mln mt; 08/09 Net: 310,200 mt; expected 1.1-1.3 mln mt
-- A report released by Strategie Grains looks for imports of Corn into the EU at 11.3 mln mt for the 2007/08 MY; report also notes to help balance global Wheat supplies the EU will need to raise second half MY 07/08 exports
-- 2007 Corn harvest in Hungary pegged at only 3.98 mln mt down from year ago 8.28 mln mt, acc. to the Hungarian ag ministry
-- 2008/09 EU cereal grain output is estimated at 290.6 mln mt a rise of 14% from the prior crop year, acc. to report by Strategie Grains
-- Press reports Wednesday that 2 additional poultry farms in Poland have been infected by the avian flu strain H5N1, bring the total to 5. This comes as a string of poultry farms have been infected. 2 Turkey farms in central Poland had been discovered infected on Dec 1st, a 3rd much smaller farm near the 2 turkey farms was infected also. About a week later a 4th farm had been found infected.
-- Dalian May Corn futures were 10 higher in overnight trade settling at 1,745 Yuan/mt
-- eCBOT Corn Vol: 170,954; Pit Vol.: 43,626; Open Interest change: +14,391
-- Weather: 6-10 Day Forecast: Above Normal Temps. Above Normal Precip. Rain and snow moves out of the eastern Corn Belt later today. Friday looks dry. Saturday will see some light snow favoring southern areas.
-- Outside markets. Energy up slightly at $94.40; Gold & Silver:-3.2 at $810 & -.095 at $14.5 ; US $ is trading lower vs. the Yen, slightly higher vs. the Euro.
Cash Markets
-- CIF Corn off 1 - 4. Dec. +28 to +33, LH Dec. +33 to +36, Jan. +40 to +42, Feb. +48 to +50, Mar. +49 to +51, A/M +40 to +42 J/J +40 to +42
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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