January 11, 2008

 

CBOT Corn Outlook on Friday: 10-12 cents higher after bullish USDA reports

 

 

Chicago Board of Trade corn futures are predicted to start Friday day-session trading 10 to 12 cents higher, boosted by bullish U.S. Department of Agriculture production and stocks data, analysts said.

 

In overnight electronic trading, March corn gained 5 cents to US$4.80 per bushel.

 

"The report was most bullish of all for corn," said Mike Zuzolo, chief analyst at Risk Management Commodities. "The USDA estimated lower ending carryover stocks and lower quarterly grain stocks," he said.

 

Ending stocks were estimated at 1.438 billion bushels, well below the 1.698 billion average analyst estimate as well as the 1.797 estimated in December. Quarterly corn stocks were pegged at 10.269 billion bushels, under the 10.550-billion average analyst estimate.

 

In addition, the USDA dropped the bushel per acre yield beneath analyst expectations and production was under the estimates as well, Zuzolo said.

 

The government estimated the corn yield per acre at 151.1 bushels, almost 2 bushels below the 153.0 estimated in November and the average analyst estimate of 152.3. Production of 13.074 billion bushels is down 35 million bushels from the average analyst estimate of 13.109 and under the 13.168 billion estimated by the USDA in November.

 

The USDA noted that production was the highest on record with the yield the second-highest on record.

 

On the demand side of corn's balance sheet, the USDA increased the amount of feed it expects to be used by 300 million bushels and left the remaining demand categories unchanged from the previous month.

 

Ahead of the opening, the USDA announced a sale of 296,000 metric tonnes of corn to South Korea and 120,000 tonnes of corn sold to unknown destinations for delivery in the 2007-08 marketing year.

 

The report is bullish for corn and the market could possibly trade to its upper price limits, a commission house analyst said. In addition to the positive fundamental news, Argentina did not receive much of the rain it was expecting and there is no rain in the forecast until the middle of next week, the analyst said.

 

Less-than-expected rainfall with amounts totaling 0.25-to-0.50 inch fell in Argentina overnight with most amounts under 0.25 inch, DTN Meteorlogix Weather said. High pressure is expected to build back into the region over the weekend into the middle of next week promoting another round of hot, dry weather and significant crop stress, especially to corn. Shower activity could develop the latter part of next week, but the situation is similar to what has just occurred and this suggests that rainfall could be quite limited, Meteorlogix said.

 

On daily technical charts, March corn prices closed lower Thursday and near mid-range on mild profit-taking, a technical analyst said. Thursday marked the second day in a row that prices closed lower, the first time corn has closed lower twice in a row in nearly two months, the analyst said. Despite the lower close, corn bulls are still in technical command. The next upside price objective remains pushing and closing prices above solid resistance at US$5.00 per bushel. The next downside objective is to push prices below solid support at US$4.68 1/4, to fill on the downside this week's upside price gap on the daily bar chart.

 

First resistance for March corn is seen at US$4.78 1/4 and then at US$4.81 1/2. First support is seen at US$4.71, and then at US$4.68 1/4.

 

In other corn news, China exported 40,000 tonnes of corn in December, down 91% on year, the General Administration of Customs reported Friday. Corn exports in 2007 totaled 4.92 million tonnes, up 58.7%, it said.

 

Corn futures on China's Dalian Commodities Exchange settled slightly lower with the benchmark September contract down RMB/3 at 1,834RMB/tonne.