High Prices Discouraging Demand

CHICAGO - May 5/08 - SNS -- International agriculture commodity markets maintained moderate activity as a rising number of large buyers show increased reluctance to participate in markets at current values.

Friday's Commitments of Traders (COT) report with options shows corn in an overbought technical condition, argue Chicago Board of Trade (CBOT) analysts, "and also shows an active long liquidation trend from trend following funds. This was partially offset by increased buying from index funds. The massive net long position of fund traders leaves the market vulnerable to increased selling from funds if support levels are violated.

"Trend following funds reduced their net long position by 25,936 contracts for the week ending April 29th and remain net long 155,915 contracts. Index funds, however, increased their net long position by 4,932 contracts to 452,568 contracts net long, and commercials were net buyers of over 20,000 contracts.

For soybeans, the COT report shows the soybean and oil markets in an overbought technical condition with an active long liquidation trend from speculators, although commercials were active buyers in both markets.

CBOT analysts said, "Trend-following funds reduced their net long position by 7,235 contracts in soybeans and remain net long 78,061 contracts for the week ending April 29th. Index funds reduced their net long position by 2,089 contracts and remain net long 171,110 contracts. In soybean oil, trend following funds reduced their net long position by 3,556 contracts and remain net long 13,367 contracts. Index funds reduced their net long position by 2,029 contracts and remain net long 174,639 contracts, and non-reportable traders reduced their net long by 4,737 contracts and remain net long 9,380 contracts. The selling trend is a bearish short term force. Speculators were net sellers of 8,773 contracts of meal and remained net long 48,877 contracts."

For wheat, the COT report shows the market in a slightly oversold condition but also vulnerable to increased selling if support levels are violated. Non-reportable traders (small specs and some producers) added slightly to their net short position to reach 22,965 contracts net short. Trend following funds increased their net short position by 4,723 contracts to 4,966 contracts. In the past 2 1/2 years, the trend following net short position has reached a peak of 39,349 contracts. The spec selling trend was partially offset by buying from index funds which increased their net long position by 2,411 for the week ending April 29th to a net long of 189,437 contracts, CBOT analysts note.

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