February 5, 2007

 

CBOT Corn Outlook on Monday: Up 2-3 cents; e-CBOT, soy, follow through buys

 

 

Corn futures on the Chicago Board of Trade are seen starting Monday's day session on firm footing, following the overnight theme, with spillover support from soybeans and carryover support from Friday's close underpinning prices.

 

Analysts expect corn to open 2 to 3 cents higher.

 

In overnight electronic trading, March corn ended 2 3/4 cents higher at US$4.04 3/4, May corn finished 2 1/2 cents higher at US$4.17 1/4, and December corn was 1 cent higher at US$3.98 1/4.

 

The corn market is in an unfamiliar position of being a follower to start the week, but soybeans are seen as the upside leader of the CBOT ag complex, with corn expected to find strength on ideas it needs to rally to secure adequate 2007 acres, analysts said.

 

Friday, soybeans bounced higher on private acreage estimates, and corn followed suit on the premise the market has to reach levels that will persuade farmers into planting additional corn acres in 2007, traders added.

 

Meanwhile, further support is expected from outlooks for increased livestock feedings during a central U.S. cold wave, analysts added. Reports of bird flu in the United Kingdom looks a little supportive on the surface, but traders have been burned trading those scares in the past and are focused on acres and demand at this point, a CBOT floor analyst said.

 

Otherwise, traders are expected to focus on technical factors in the absence of any other fresh news, with traders looking for signs the market can break out of its recent trading range.

 

A technical analyst said recent price action has formed a fledgling downtrend channel on the daily bar chart, but the corn bulls still have the near-term technical advantage. No serious chart damage has occurred recently, however market bulls would gain better upside technical momentum by producing a close above chart resistance at last week's high of US$4.09 1/4 basis March futures. The next downside price objective is producing a close below solid chart support at US$3.92.

 

First resistance for March corn is seen at Friday's high of US$4.05 3/4 and then at US$4.09 1/4. First support is seen at Friday's and last week's low of US$3.95 and then at US$3.92.

 

The Commodity Futures Trading Commission on Friday reported in its supplemental commitment of traders report that index funds were reported to hold net long positions totaling 350,009 combined corn futures and options contracts as of Jan. 30, down from 356,186 the prior week. Traditional large speculative traders were net long 279,943 contracts compared to net longs of 285,284 in the previous week. Commercials were reported to hold net short combined futures and options positions totaling 564,514 contracts, down from the previous week's 576,071 contracts.

 

On tap for Monday, the U.S. Department of Agriculture is scheduled to release its weekly export inspection report at 11:00 a.m. EST.

 

U.S. Midwest cash corn basis bids were mostly steady Monday, cash traders said. Spot U.S. cash corn bids were up 4 cents in Evansville, Ind., up 5 cents in Eddyville, IA, and down 2 cents in Peoria, Ill.

 

The DTN Meteorlogix weather forecast said the US and European models are in fair to good agreement during the next 10 days. We appear to be heading towards a split jet stream pattern for the 7-10 day period. This will continue to be a cold pattern for the north-central and northeast USA. It may become a more active weather pattern for the southern plains and the lower Mississippi river valley.

 

In Argentina, greater than expected rain was seen in Cordoba, Sante Fe and northern Buenos Aires during the weekend with another significant rain system possible late in the week. This should maintain favorable conditions in northern corn areas, but conditions are still quite stressful for crops in La Pampa and southwest Buenos Aires, Meteorlogix reports.

 

In other news, a growing surplus of unsold corn in Europe represents a threat to the stability of the European agricultural markets, a report published by the European Commission said Monday.

 

An outbreak of bird flu on a big English turkey farm should pose no risk to the public or to the poultry industry, a government minister said Monday as investigators continued trying to identify the source of the infection. About 2,500 turkeys died of H5N1 strain of bird flu on the farm owned by Bernard Matthews PLC, Europe's largest turkey producer. It was the first time H5N1 had been found on a U.K. farm.

 

In overseas markets, corn futures traded on China's Dalian Commodity Exchange settled higher, tracking the rise of soybean contracts. The September contract rose RMB7 to RMB1,717/tonne.