January 12, 2010

 

CBOT Corn Outlook on Tuesday: Down 10-15 cents on bearish USDA report

 

 

Chicago Board of Trade corn futures are expected to open 10 cents to 15 cents lower Tuesday following the government's surprisingly large estimate of the 2009 U.S. corn crop.

 

The crop size was much larger than analysts were expecting after a lousy end to the growing season, including a harvest that hasn't even been completed in some areas.

 

The U.S. Department of Agriculture estimated total U.S. production at 13.151 billion bushels, up from the average analyst estimate of 12.819 billion bushels and above the government's previous estimate of 12.921 billion. Last year's crop totaled 12.101 billion bushels.

 

The yield estimate of 165.2 bushels per acre was above the average trade guess of 162.5 and higher than all analyst estimates in a Dow Jones Newswires survey.

 

"In the eyes of the government, the biogenetics of corn seeds allowed the crop to turn out better than Mother Nature would have you believe," PFG Best analyst Tim Hannagan said.

 

The government did acknowledge lingering uncertainty about the crop, saying, it will resurvey corn and soybean acreage, yield, production and stocks. The USDA said it "may release" updated forecasts in March.

 

Ending stocks, meanwhile were pegged at 1.764 billion bushels. The USDA's estimate was well above the average trade guess of 1.613 billion bushels and above the government's December estimate of 1.675 billion.

 

The government said corn stocks in all positions as of Dec. 1 totaled 10.934 billion bushels, up from the average trade guess of 10.633 billion bushels, and much higher than the total of 10.078 billion the same time a year ago.

 

The bearish reports will make it harder for bulls to top recent resistance around US$4.25 per bushel.

 

Bearish outside markets, particularly weaker crude oil, will add to the pressure, traders said.

 

In overnight trade, March corn was down 9 cents to US$4.13 1/2 per bushel and May corn was down 9 cents to US$4.24.

 

The next upside price objective is to push and close prices above strong technical resistance at last week's high of US$4.26 1/4 a bushel, a technical analyst said. The next downside price objective for the bears is to push and close prices below major psychological support at US$4.00 a bushel.

 

First resistance for March corn is seen at US$4.20 and then at Monday's high of US$4.25. First support is seen at Monday's low of US$4.18 and then at last week's low of US$4.13 1/4.