The corn market closed limit down in almost all months on Monday as we continue to see mass liquidation in all commodities, especially the grain markets. Traders said we are seeing general sell off in commodities as well as speculative selling in the grain markets. Speculators and funds looked to reduce risk in these uncertain markets by reducing risk and cutting positions to more manageable levels. After the Bear Stearns deal, traders seemed to worry about firms with rumors circulating that one of the biggest commodity clearing firms was in trouble as its stock dropped almost 65% yesterday. Some big players in the financial industry are having to liquidate commodity positions to help pay for their exposure to the credit markets. Traders also pointed to outside markets as helping to push corn lower, especially crude oil selling off over $6.00 at one point and closing $4.50 lower. Really traders are pointing to money management instead of fundamentals as the reason for the sell off. Volume and fund selling was limited because of the limit down move with fund selling only 7,000 contracts. Options were where all the volume was taking place and corn closed down synthetically another 10 cents.
The corn market sold off overnight as expected as synthetically the corn market was another 10 cents lower after Monday’s limit down close. The May and July contracts closed about 4 cents lower and the December contract closed 5 ½ lower. The fundamentals haven’t changed in the commodity markets, but right now, we are in a money management situation where funds are having to raise cash and save equity by liquidating commodity positions. Remember, commodity positions can be liquidated and you can have access to those funds for the next day. The corn market is being supported compared to the soy complex because of the strong demand and the weaker US$. Exports remains strong and weekly import inspections were stronger than expected yesterday. The corn market is caught in the down draft of the commodity selling and there isn’t any bullish fundamental news that can stop this drop. Until the fund and speculation liquidation is over, the corn market will continue to follow the other markets lower. The USDA report released on March 31st is expected to show a big drop in corn acres planted this spring here in the US and we are continuing to hear stories to support this drop in acres and increase in bean acres. Maybe too much of a switch and we take care of the soybean shortage in 1 year, just like we did with corn last year. Corn should open in-line with the overnight closes and then look for support. There should be some underlying support in corn today.
Globex Overnight
Contract Last Net Change High Low
ZCK8 535^0 -4^2 539^0 528^0 ZCN8 547^2 -4^0 551^2 540^4 ZCU8 549^6 -3^4 550^4 542^2 ZCZ8 549^4 -5^4 553^6 541^4 ZCH9 552^0 -11^0 561^0 552^0
Early Opening Calls: 3-5 cents down
Top News
-- Monday's Weekly Corn Inspections: 48.821 mln bu; expected 42.5 mln bu -- 40% of Texas corn crop planted up from 39% in same week year ago. 3% has emerged down from the 7% seen same week year ago. Corn planting continued in South Central, while planting was delayed due to wet fields in the Blacklands and North East Texas. -- Oklahoma Corn seedbed preparation was at 45%, 13 points ahead of normal, and a small portion of the State’s acreage had been planted by week’s end. -- Georgia Corn plantings were 7% in latest week up from 2% pace last week, but behind the 20% pace year ago; 1% of the corn crop had emerged, but was behind the 5% pace last year. Corn was 1% vp-poor; 42% fair; 57% good-excellent. -- CME Group announced it will offer electronically traded options on futures contracts in Corn, Soybeans, Soymeal, Soyoil, Wheat, Oats, & Rough Rice side by side during day-time open outcry trading hours beginning April 14, 2008. -- Dalian Sept Corn futures were 50 Yuan lower at 1,761 on 1.57 mln contracts trading overnight. Other months were lower also. -- Globex Corn Vol: 103,905; Pit Vol.: 15,802; Open Interest change: -4,235 -- Weather: 6-10 Day Forecast: Normal to Below Temps. Normal to Below Precip. The Corn Belt will see rain, snow and thunderstorms today ending in the east Wednesday. Thursday looks dry. Friday will see light showers return. -- Outside markets: Energy Complex +2.61 $108.29; Gold & Silver: +9.3 at $1012.3 & +0.209 at $20.495; US $ is better vs. Yen & is lower vs. Euro
Cash Markets
-- CIF Corn steady up 3. Mar. +37 to +40, Apr. +35 to +41, May +40 to +44, June +35 to +40, July +40 to +42, Oct. +39 to +46, Nov. +40 to +46.
TREND:
The sell off today was wide and deep. All commodities but gold were involved. Energy market was very severe with Nat Gas moving over 10 pct in one day. Cotton, Sugar, Grains and Meats---nothing was ignored. Markets are very oversold in general tonight but suspect the selling continues. This is not your general technical selling but takes on a panic get me out type of trade.
Corn has less of a technical reason to sell off further. The bean complex below is more compelling. Look for corn to be supported on small weakness tomorrow.
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 jriley@linngroup.com
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