Corn futures on the Chicago Board of Trade closed mixed Tuesday, with nearby contracts higher after a 10-year top was reached but prices for all months ended well below the day's highs due to profit-taking, traders said.
CBOT corn closed 7 cents per bushel higher to 6-3/4 lower, with March up 6-1/2 at $4.03 per bushel. Corn surged 5 percent to its 20-cent per bushel trading limit early in the session, notching a 10 year top, but the market ran out of momentum, floundered through the balance of the session and distant contracts ended lower.
Volume was huge estimated at 456,877 futures, near the record of 475,933 futures. Options trade was also large pegged at 111,057 contracts.
"We've pretty well absorbed the impact of the USDA reports and there aren't any major reports coming before the March 31 report," said Shawn McCambridge, analyst for Prudential Financial.
On March 31, USDA will release its annual plantings report and there are expectations US farmers will shift a large portion of their land away from soy plantings into corn this year because of surging corn prices and the need to grow more corn to meet the rapidly expanding demand from the ethanol industry.
"There was some profit-taking and some hedge selling today," McCambridge said.
USDA on Friday shocked the market by releasing a 2006 US corn production number below expectations, resulting in forecasts for a rapid drawdown of corn stocks by the end of this year as the demand for corn remains solid.
Corn locked up its 20-cent limit Friday and there was a big volume trade when trading resumed in the overnight electronic trading session on Monday. The day-trade session was closed on Monday, the US Martin Luther King Jr. Day holiday.
Volatility in the corn market prompted the CBOT to increase the initial margin to trade corn futures to $1,215 from the previous $1,013 effective with the close of business on Tuesday.
Crop weather remains satisfactory for corn production with plentiful precipitation in the US Midwest adding to soil moisture reserves and buoying prospects for a solid start for the soon-to-be-seeded US 2007 corn crop. And weather remains good overall in South America's corn and soybean belt.
Cash basis bids in the Midwest late Tuesday were weak after increased farmer sales following the rally in CBOT. But sales tapered off by Tuesday. Exports were routine over the weekend and early Tuesday USDA said corn inspected for export last week totalled 33.4 million bushels, below estimates for 37.0 million to 42.0 million bushels.
Friday's CFTC commitments of traders report for futures and options combined showed that as of last Tuesday large speculators were long 318,152 lots, down 21,414 from the previous week and short 71,817 lots, up 14,076 contracts.
Chart-based traders saw the March contract on Friday rally well above all key moving averages and the nine-day relative strength index moved above the overbought level of 70 to 74.
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