January 12, 2009

 

CBOT Corn Outlook on Monday: Down 5-10 cents following USDA reports

 

 

Monday's U.S. Department of Agriculture production and supply-and-demand reports were bearish for corn, and should push the market lower on the open, traders and analysts said.

 

Corn is called 5 to 10 cents lower following the USDA reports, which issued a surprising increase in production estimates and a larger-than-expected jump in 2008-09 ending stocks.

 

"Along with crude oil down, I don't see any reason not to be sharply lower," a trader said.

 

The USDA pegged corn production at 12.101 billion bushels, up from 12.020 billion. The trade has been expecting a cut in production to 11.982 billion, due to a late harvest that has left some of the crop still in the field.

 

Weak demand continues to weigh on the market, and the USDA Monday pegged ending stocks at 1.790 billion bushels, up from 1.474 in December. The trade expected a modest increase to 1.489 billion.

 

"The corn numbers were pretty bearish, with U.S. [ending] stocks jumping off the scale , reflecting a cutback in ethanol and Exports," said Bill Nelson, adviser with Doane Advisory Services. "Both world and domestic data should weigh on corn."

 

World ending stocks are pegged at 136 million metric tonnes, up from the December estimate of 123.8 million, the USDA said.

 

The market dropped 1 to 2 cents overnight. Outside markets appear poised to add pressure Monday, traders said.

 

The only positive thing for the market is South American weather, traders said, but there are mixed views of that. A trader said that while dryness in Argentina appears to be getting worse, weather in Brazil appears to be improving.

 

Speculators added 3,810 contracts to their CBOT corn long positions and cut 5,183 contracts from their short positions, putting them net short 12,302 contracts, the Commodity Futures Trading Commission said Friday. The supplemental commitments of traders report also showed that commercial funds cut 9,108 contracts from their long positions and added 6,767 contracts to their short positions, putting them net short 177,664 contracts.

 

Index funds added 8,103 contracts to their long positions and 1,051 contracts to their short positions, putting them net long 246,609 contracts, the CFTC said.

 

The next downside price objective for the bears is to push and close March prices below major psychological support at US$4.00 a bushel, a technical analyst said. The bulls' next upside price objective is to push and close prices above solid technical resistance at last week's high of US$4.29.

 

First resistance for March corn is seen at Friday's high of US$4.18 1/4 and then at US$4.25, the technical analyst said. First support is seen at Friday's low of US$4.07 1/2 and then at US$4.00.