January 24, 2007

 

CBOT Corn Outlook on Wednesday: Seen down; no surprise in bush speech

 

 

Corn futures traded on the Chicago Board of Trade are seen starting Wednesday's day session lower, in a "buy the rumor, sell the fact" scenario following the highly anticipated State of the Union address from President Bush Tuesday night.

 

Analysts expect corn to open 5 to 6 cents lower.

 

The overnight theme is laying the ground work for the lower start, with traders expecting an early corrective back draft in prices, since the president's speech did not provide any surprises and futures had previously priced in bullish thoughts, analysts said.

 

In overnight electronic trading, March corn ended 6 1/4 cents lower at US$4.02 3/4 and May corn finished 6 3/4 cents lower at US$4.13 1/2.

 

President Bush's energy proposal calls on Congress to require the use of 35 billion gallons of ethanol and other alternative fuels such as biodiesel by 2017. The ethanol would be in gasoline blends of 10 to 85%. The trade had been factoring in proposals as high as 60 billion gallons over 20 years.

 

The market is overbought, and without fresh supportive news to feed bullish appetites, profit taking pressure is posed to rear its head, said a CBOT floor analyst. Nevertheless, longer range demand prospects and the need to acquire the necessary 2007 acres to meet demand needs is expected to keep a floor under prices, and keep new crop futures well supported, he added.

 

A technical analyst said market bulls are still in firm technical command, as prices have been pausing at higher levels and that isn't bearish. A bull flag or bullish pennant pattern is forming on the March daily bar chart, and he looks for higher volatility in the near term.

 

First resistance for March corn is seen at Tuesday's high of US$4.10 1/2 and then at US$4.15. First support is seen at Tuesday's low of US$4.05 and then at this week's low of US$4.01.

 

U.S. Midwest cash corn basis bids were mostly steady Wednesday, cash traders said. Spot U.S. cash corn bids were up 3 cents in Cedar Rapids, IA, down 2 cents in Peoria, Ill, and down 2 cents in Evansville, Ind.

 

The DTN Meteorlogix weather forecast said episodes of scattered thunderstorms will maintain favorable conditions for Argentine crops. Scattered showers and thunderstorms, 0.30-1.00 inch and locally heavier, are expected through Cordoba, Sante Fe, northern and eastern Buenos Aires Wednesday and Thursday. A chance for showers, 0.10-0.50 inch, through La Pampa and southwest Buenos Aires will mainly occur during Thursday or Thursday night while clearing Friday.

 

Temperatures will average near to above normal during this period. Mainly dry conditions are on tap for Saturday and early Sunday, with a chance for light showers developing in the south late Sunday or during Sunday night, Meteorlogix reports

 

Meanwhile, China's cash corn prices in major producing regions were largely stable in the week to Wednesday, although a seasonal up tick in feedmeal demand saw a slight rise in corn prices in some provinces, analysts said.

 

China's corn futures traded on the Dalian Commodity Exchange settled lower, failing to gain momentum as cash market prices were largely stable, analysts said. The benchmark September 2007 corn contract fell RMB10 to settle at RMB1,713/tonne.