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CBOT Corn Review: Spillover, Techs Pressure Market

Published on 23 February, 2006, Last updated at 13:26 GMT

22nd Feb, 2006 - CBOT corn futures fell Wednesday on speculative-led selling in sympathy with weak wheat and soybean futures and as rains move through South American growing areas. Concerns over the spread of bird flu and its negative effect on poultry feed added light pressure to the market, sources said.

Commodity funds were net sellers of an estimated 1,400 corn contracts, with UBS and Man Financial the largest sellers.

Most-active March corn lost 4 1/2 cents to $2.21 1/2 and May fell 4 1/2 cents to $2.32 1/2 a bushel.

"I think the weather in South America, though it's not as important to corn as it is to beans, it's probably had a negative influence," said Dale Durchholz, senior analyst at AgriVisor Services in Bloomington, Ill.

In addition, corn has been hanging on to wheat's coattails and received spillover pressure from that market, he noted.

Argentina's growing areas saw scattered thunderstorms Wednesday, most of which were confined to southern La Pampa and southern Buenos Aires. Hot, dry conditions with only isolated showers were seen elsewhere, weather service DTN Meteorlogix said.

The rains are expected to last through Thursday, with clearing and windy conditions setting in on Friday. Temperatures are expected to be very high Wednesday but will turn much cooler by Thursday and Friday, Meteorlogix said.

Continued concerns over the spread of highly pathogenic avian flu around the world and its negative effect on poultry consumption and feed demand also put subtle pressure on the market.

"When you look at poultry numbers outside of the United States, it's starting to become obvious that poultry consumption is starting to sag a little bit," Durchholz said.

Tests confirmed the deadly H5N1 bird flu virus in fowl in Austria, officials announced Wednesday. The virus has been confirmed in fowl in seven E.U. nations, though it has not been found in any commercial flocks.

An outbreak of bird flu is virtually unavoidable in Afghanistan as migratory birds that could carry the virus are already arriving in the country and local government and donor nations have been slow to prevent the disease from spreading to the country, a U.N. official said Wednesday.

Meanwhile, technical factors also were at play in the market, with the failure of March corn to scale and surpass the recent highs at $2.27 to $2.27 1/2, which attracted technical sales to the market, Durchholz noted.

"I think when we turned down below yesterday's (Tuesday) low, we probably ran into some stops," he said.

Technically, resistance on March corn is met at $2.26 1/2 and $2.27, then $2.27 1/2. Support is uncovered at $2.24 1/2, $2.23 1/2, $2.22 1/4, $2.20 and $2.17.

UBS sold 700 Mar, Man Financial sold a net 500 Mar, Calyon Financial and FCStone each sold 300 May, Citigroup Global Markets sold 300 May and a net 100 Mar and Goldenberg Hehmeyer sold a net 200 May and 100 Mar.

USA Trading bought 600 Mar, Fimat bought 400 May and 400 Mar, Kottke bought 400 May, J.P. Morgan bought 300 Mar and O'Connor and Rosenthal each bought 200 Mar.

Fimat spread 4,000 May/Mar and ABN Amro spread 500 July/March contracts.


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