January 15, 2009

 

CBOT Corn Outlook on Thursday: Down slightly; poor export sales weigh

 

 

Chicago Board of Trade corn futures are expected to open 1 to 3 cents lower Thursday following overnight losses, as concerns about weak demand continue to weigh on the market.

 

In overnight trade, March corn was down 1 cent to US$3.65 1/2 per bushel, May corn was down 2 cents to US$3.75 1/2 and July corn was down 2 cents to US$3.85 3/4.

 

Although the market has appeared to stabilize after sharp losses Monday and Tuesday, corn is still feeling the effects of Monday's government crop-production and carryout estimates, which were much higher than expected.

 

"Monday's USDA report confirming the bearish outlook for the balance of the crop year puts the bulls' hopes for any meaningful recovering on a weather problem developing somewhere around the globe in 2009 or the energy market spiking higher for no fundamental reason as it did in 2008," Jon Michalscheck, Benson Quinn Commodities analyst, wrote in a market commentary.

 

Export sales remain "just plain horrible," a trader said, with net export sales for the week ended Jan. 8 reported at 216,000 metric tonnes Thursday morning, a marketing-year low and down 49% from the prior four-week average. Sales were below analysts' expectations of between 350,000 and 550,000 metric tonnes. Sales were reported at 280,600 metric tonnes the previous week.

 

But a trader calls the report "last week's news," and analysts say corn's recent break from a high of US$4.27 1/2 should help boost ethanol margins and make U.S. corn more attractive for export.

 

"Nonetheless, it reminds the trade that it can't afford to rally too much and ration demand," the trader said.

 

Soybeans, which are expected to climb following overnight gains and strong export sales, should help limit corn's losses, a trader said. Also, dry South American weather, particularly in Argentina, continues to provide support.

 

Index-fund rebalancing, which has weighed on the market in recent days, particularly late in each session, is mostly done, although a trader said some may spill over into Thursday's trade.

 

In other export news, the Philippines Department of Agriculture has offered to import up to 200,000 metric tonnes on behalf of local feed millers and livestock and poultry raisers to address problems associated with record high local prices of the grain, industry officials said.

 

The next downside price objective is to push and close prices below solid technical support at US$3.50 a bushel. The next upside price objective is to push and close prices above major psychological resistance at US$4.

 

First resistance for March corn is seen at Wednesday's high of US$3.69 1/2 and then at US$3.75. First support is seen at Wednesday's low of US$3.58 3/4 and then at US$3.50.