U.S. grains: Corn ends firm on strong ethanol production, technicals

U.S. corn futures firmed on Wednesday in subdued trade, supported by fund short-covering and strong domestic ethanol production, traders said.

Wheat rebounded after the front contract fell to a near four-month low on continuous price charts, and soybeans clung to narrow gains.

At the Chicago Board of Trade, most-active March corn settled up 3-1/4 cents at $4.39-1/4 per bushel but stayed inside of the previous day’s trading range (all figures US$).

March wheat ended up two cents at $6.40-3/4 per bushel and January soybeans finished up 5-3/4 cents at $13.44 a bushel, buoyed by a flurry of technical buying just ahead of the closing bell.

Corn got a lift when the U.S. Energy Information Administration reported U.S. ethanol production in the latest week at 944,000 barrels per day, up 31,000 from the previous week.

Ethanol producers have been paying up to buy corn from Midwest farmers in an effort to capture favourable profit margins.

“Some plants across the United States are currently showing a profit of as much as 70 cents per gallon. This is close to $1.50 of revenue per bushel of corn,” Karl Setzer, a commodity trading advisor with the MaxYield Cooperative in West Bend, Iowa, wrote in a note to clients.

In a monthly report on Tuesday, the U.S. Department of Agriculture raised its forecast of the amount of corn used to make U.S. ethanol in 2013-14 to 4.95 billion bushels, up 50 million from its previous estimate.

Some attributed the firm tone in the corn market to technical buying by commodity funds.

“We had a great ethanol grind number, but to me the big thing is still managed money short-covering ahead of the end of the year,” said Tom Fritz, a partner at EFG Group in Chicago.

Funds hold a large net-short position in CBOT corn, leaving the market vulnerable to periodic short-covering.

Also supportive, the USDA said private exporters reported sales of 120,000 tonnes of U.S. corn to unknown destinations for delivery in the current marketing year.

Concern about China rejecting more U.S. corn due to an unapproved genetically modified variety hung over the market.

Since mid-November, quarantine authorities in China, the world’s second-largest corn consumer, have turned away about 180,000 tonnes of the grain.

CBOT wheat rebounded after the thinly traded December contract, which expires on Friday, fell to a near four-month low on continuous price charts.

Traders were still digesting a larger-than-expected forecast of global 2013-14 wheat ending stocks issued Tuesday by USDA. But some thought the wheat market was oversold, noting that funds already hold a hefty net short position in CBOT wheat.

Tuesday’s selloff in wheat appeared to attract interest from Egypt, the world’s top importer, which on Wednesday bought 300,000 tonnes of Romanian and French wheat for shipment Jan. 10-20.

CBOT soybeans posted modest gains, caught between strong nearby export demand for U.S. soybeans and soymeal, and expectations for a huge South American soy harvest in early 2014.

“South American crops get into the pipeline (in) late February, March, April. But the United States has great demand between now and then, so what do you do?” Fritz said.

– Julie Ingwersen is a Reuters correspondent covering ag commodity markets from Chicago. Additional reporting for Reuters by Michael Hogan in Hamburg and Colin Packham in Sydney.