January 8, 2009

 

CBOT Corn Outlook on Thursday: Down 4-6 cents; weak demand, profit-taking

 

 

Chicago Board of Trade corn futures are expected to open 4 cents to 6 cents lower Thursday on overnight losses and profit-taking ahead of Monday's government reports.

 

Corn is called 4 cents to 6 cents lower. In overnight trading, March corn was down 6 1/2 cents to US$4.10 per bushel. May corn was down 6 1/2 cents to US$4.20 3/4 and July corn was down 6 cents to US$4.31 1/4.

 

"We saw tremendous gains, and index fund portfolio rebalancing begins today, we've got a crop report coming out Monday morning," said Arlan Suderman, analyst for Farm Futures. "It's time to pull back some of the profits."

 

Corn's recent rally has come despite a lack of much positive news and continued weakness in export sales. Net export sales for the week ended Jan. 1 were 280,000 metric tonnes for the 2008-09 and 2009-10 marketing years, the U.S. Department of Agriculture reported Thursday. Sales were 269,900 metric tonnes the previous week, and analysts were expecting sales between 250,000 and 500,000.

 

The trade continues to monitor South American weather, which has given the market an underpinning of support recently, before weighing on the market Thursday due to forecasts that call for increased rainfall.

 

But the DTN Meteorlogix forecast Thursday said chances for "better shower activity" in Argentina is confined to a 36- to 48-hour period early next week, which is less than indicated on Wednesday's maps, making the prospect for more rainfall "uncertain."

 

The dry weather is also seen affecting the crop in Brazil, which should produce 52.2 million metric tonnes of corn in 2008-09, the National Commodities Supply Corp., or Conab, said Thursday.

 

Conab's crop estimate is also lower than its Dec. 8 estimate of 54.4 million metric tonnes of corn in 2008-09. Total production is seen falling as much as 11% from the 2007-08 season.

 

In international news, a China think tank Thursday increased its 2008 crop year output estimates for corn and rice substantially, while keeping the estimates for other major crops unchanged.

 

The China National Grain and Oils Information Center hiked its corn output forecast by 9.5 million metric tonnes to 165.5 million tonnes, on higher unit yields.

 

That extra corn could weigh on the market, a trader said, although a floor analyst said it is unlikely to have much of a lasting impact unless China decides to subsidize it.

 

Outside markets are mixed, analysts said, with lower crude oil adding pressure. The dollar is also weaker, however, which is usually supportive.

 

The rebalancing of index fund portfolios is expected to be bearish for corn, analysts said.

 

Suderman said barring a supportive shift in outside markets, traders will be unlikely to buy corn heading into Monday's U.S. Department of Agriculture reports. The USDA will release new figures for ending stocks, quarterly stocks and production at 8:30 a.m. EST.

 

The next downside price objective for the bears is to push and close prices below major psychological support at US$4.00 a bushel. The bulls' next upside price objective is to push and close prices above solid technical resistance at US$4.50.