The corn market closed lower on Tuesday on the back of profit taking and the lack of fresh news out on the corn market. The corn market has closed higher over the last week or so and corn was almost 40 cents higher since the end of November and was due a pull back. The corn market made 11 year highs on Monday. The March contract closed 6 ¾ lower and the profit taking started early in the session. Even with the sell off, the market gave back little of what it had gained over the last 30 days. Technicians said that March closed above its moving averages even though it was weaker. Remember, this is the last full week of the year and many traders and funds are squaring positions before the start of the holiday markets. Volume was moderate, but light compared to recent sessions and funds sold close to 5,000 contracts on the day. The weather in So. America seems to be a non-issue as the rains last week eased talk of dryness as the crop is just getting started. Traders also pointed to a stronger US$ which hit a 2 month high against the major currencies.
eCBOT market was higher overnight with the March contract closing 2 ¾ higher after yesterday's sell off. Overnight, China announced that they would be selling another 500,000 tones of corn from their reserves. This is the 3rd announced sale from their reserves over the last 3 weeks and points to a tighter world corn market. Taiwanese feed markers were seeking up to 370,000 tones of Chinese corn and now due to tight domestic supplies, it doesn't look like it is going to happen. This is just another sign that China will not be exporting corn this year. President Bush is expected to sign the Energy Bill this morning which includes the mandate for the use of ethanol. The rains in Argentina last week were deemed very helpful, but some of the rains forecast for this week and weekend are being reduced by some forecasters which will help support the corn market. Look for corn to open higher this morning and then look for direction from outside markets. Wheat will be stronger this morning giving support to the corn market and crud oil is higher. It should be difficult for corn to find buyers on a higher market, unless the funds get involved.
eCBOT Overnight
Contract Last Net Change High Low
ZCK8 444^4 1^6 445^2 441^2
ZCH8 434^6 2^6 435^0 430^2
ZCN8 453^0 2^6 453^0 449^0
ZCU8 450^4 2^0 450^4 447^0
Early Opening Calls: 2-3c better
Top News
-- 500,000 mt Corn sales tender announced by Chinese gov't from its grain reserves set for December 25th. This would the 3rd announced sale from reserves during December following ones on Dec 11 & Dec 18.
-- To encourage more hog production Chinese officials are looking at subsidies to farmers. Proposals include money earmarked to help farmers improve hog farm structures, money for vaccinations against various diseases & subsidies to encourage keeping sows in breeding stocks.
-- Dalian Corn futures fell 6 in overnight trade to 17,25 Yuan/mt while most other contract months in the complex were lower also
-- eCBOT Corn Vol: 107,067; Pit Vol.: 29,611; Open Interest change: +4,137
-- Weather: 6-10 Day Forecast: Above Normal Temps. Normal to Above Precip. The Corn Belt will be dry today into Friday. Saturday will see some showers and snow. Sunday looks dry. Temps normal to above.
-- Outside markets: Energy complex +.27 at $90.35; Gold & Silver -2.0 at $801 & steady at $14; US $ down slightly vs. Yen and up slightly vs. Euro
Cash Markets
-- CIF Corn steady up 2. Dec. +24 to +27, LH Dec. +28 to +31, Jan. +33 to +36, Feb. +43 to +45, Mar. +45 to +46, A/M +38 to +40 J/J +38 to +40
TREND:
My point in the charts in the start of the wire is to show that the rally in this market may not be done. I remain bearish for the short run but the long term outlook is really still up in the air. Take note
Seasonal outlook is for a break into the holiday. Could get more dynamic than I think but the potential of the market is so big that I have to come away from shorts on the break that comes over the coming week and not stay into the New Year
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.
