January 10, 2007

 

CBOT Corn Outlook on Wednesday: Steady to 1 cent higher on position squaring

 

 

Chicago Board of Trade corn futures are expected to begin trading steady to 1 cent higher Wednesday following slightly higher prices in the overnight session and expected position squaring after recent weakness, floor sources said.

 

In overnight e-CBOT trading, March corn rose 1 1/4 cents to US$3.55 3/4 per bushel and May gained 1 cent to US$3.65 1/2. e-CBOT volume in March was 8,236 contracts.

 

Corn should start out steady to slightly higher on the modest gains in overnight trade and on position squaring ahead of Friday's U.S. Department of Agriculture reports, a floor source said.

 

In a Dow Jones Newswires survey, the average corn production estimate of eighteen analysts was 10.706 billion, 39 million lower than the USDA's estimate of 10.745 billion in November.

 

The average corn yield per acre was 150.8 bushels per acre, slightly lower than the 151.2 estimated in November.

 

The average of 12 analysts polled estimated Dec. 1 quarterly corn stocks at 9.107 billion bushels versus Dec. 2006 USDA estimate of 9.815 billion.

 

The average of 15 analysts surveyed pegged corn ending stocks at 893 million bushels, 42 million less than the 935 million estimated by the USDA in December and far below the 1.971 billion for the 2005-06 crop.

 

March corn has declined over 35 cents since the start of the year and is due for a bounce, a commission house analyst said. However, fund selling was active Tuesday and the market could see more liquidation Wednesday limiting the upside, he added.

 

In addition, March corn is weak technically and is holding just above a price gap created last fall. If the market fails to remain above the gap, additional technical selling could press the market lower, the analyst added.

 

On day session open auction technical charts, March corn gapped open lower and hit a fresh two-month low, a market technician said. The bulls' next upside objective is closing prices above strong technical support at US$3.70, with the bears' next near-term downside price target closing prices below solid support at US$3.70.

 

First resistance for March corn is pegged at Tuesday's high of US$3.59 1/2 and then at US$3.65. Support is seen at Tuesday's low of US$3.54 and then at US$3.50.

 

Cash corn basis bids were unchanged to mostly higher Wednesday. Central Illinois was unchanged at 4 cents under March.

 

In other corn news, cash corn prices in China were up slightly in the past two weeks on farmer reluctance to sell, sources said. However, analysts note prices should remain stable ahead of the Spring Festival holiday, which occurs in late February this year.

 

Cash prices of corn delivered to Asia may continue to decline the remainder of this week on expected losses at the CBOT, sources said.

 

The Korea Corn Processing Industry Association has purchased 110,000 metric tonnes of optional-origin corn from Dreyfus in a tender concluded Wednesday, an association official said.

 

Corn futures prices on China's Dalian Commodities Exchange settled mostly lower, following the weakness in prices at the CBOT, sources said. The most active September contract slipped RMB4 to settle at RMB1,666/tonne.