January 12, 2007

 

CBOT Corn Outlook on Friday: Sharply higher start after USDA reports

 

 

Chicago Board of Trade corn futures are predicted to begin trading 10-20 cents higher Friday after the U.S. Department of Agriculture estimated corn production well below the average analyst estimates, sources said.

 

In overnight e-CBOT trading ahead of the reports, March corn ended unchanged at US$3.76 1/2 per bushel and May slipped 1 1/4 cents to US$3.86 1/4. e-CBOT volume in March was 9,831 contracts.

 

The USDA estimated U.S. 2006-07 corn production at 10.535 billion bushels, well below the 10.745 billion projected by the USDA in November as well as the 10.706 billion average analyst estimate.

 

The USDA pegged the 2006-07 final yield per acre at 149.1 bushels per acre, below the 151.2 bushels estimated in November.

 

"This is a big report, one that produced a big surprise in how far the USDA took corn's yield down," said Don Roose, president of US Commodities in West Des Moines, Iowa. "Corn is the highlight, as the margin of error has shrunk dramatically looking ahead to the demand profile for the market. New crop corn will be the focus, as the market will have to buy acres, and the report sends the right message at this time."

 

The USDA estimated ending stocks at 752 million bushels, well below the 935 million estimated in December and above the average analyst estimate of 893 million bushels, as the lower production and a 50 million bushel increase in exports trimmed the amount of ending stocks.

 

Grain stocks as of Dec. 1, were pegged at 8.930 billion bushels, below the average trade guess of 9.107 billion and the Dec. 1, 2005 stocks of 9.815 billion bushels.

 

The corn number was a surprise as the USDA trimmed the production and yield data by more than expected and futures will open higher on the news, and could trade limit up, a floor trader said.

 

On day session open auction technical charts, March corn gapped higher Thursday and bulls repaired most of the recent technical damage, a market technician said. Concerns of a bearish double-top reversal pattern were lessened Thursday and a strong close Friday would put market bulls back in the driver's seat, he added.

 

The bulls' next upside price objective is closing prices above technical resistance at US$3.80, while the bears' next near-term downside objective is closing prices below support at US$3.63 1/2, the technician said.

 

First resistance for March corn is seen at Thursday's high of US$3.80 1/4 and then at US$3.85. First support is pegged at US$3.70 and then at US$3.67.

 

In other corn news, corn futures prices on China's Dalian Commodities Exchange ended slightly higher ahead of the USDA reports on Friday, a Chinese analyst said. The most active September contract gained RMB/9 to settle at RMB1,703/tonne.

 

Friday afternoon the Commodity Futures Trading Commission is scheduled to release the commitment of traders' report for the period ending Jan. 9.