February 8, 2008

 

CBOT Corn Outlook on Friday: 5-8 cents higher; USDA report seen neutral

 

 

Chicago Board of Trade corn futures are expected to begin day session trading 5 to 8 cents higher Friday based on strong gains in overnight trade despite a "neutral" supply and demand report released by the government Friday morning, analysts said.

 

In overnight electronic trading, March corn rose 7 cents to US$5.06 1/2 per bushel and December gained 5 cents to US$5.27 1/2. Electronic trading volume in March was over 38,000 contracts.

 

The U.S. Department of Agriculture estimated 2007-08 corn ending stocks at 1.438 billion bushels, unchanged from the previous month and above the average analyst estimate of 1.411 billion bushels.

 

"The corn carryout number was unchanged which was a little surprising, as the USDA left the export number unchanged," said Bill Nelson, associate vice president at AG Edwards & Sons. The market was stronger overnight and there was nothing in the report to discourage a higher opening, said Nelson.

 

The USDA lowered its estimate of Argentina's corn production by one million metric tonnes to 21.5 million as "extended dryness during the first few weeks of January reduced yield prospects," the government reported. The world corn carryover was raised slightly to 101.9 from 101.3 in the previous report.

 

The report "had nothing negative in it to slow down the overnight rally," a commission house analyst said. Strong speculative buying pushed the market higher overnight and the "outside" inflationary markets are posting good gains as well, as speculative interests continue to want to own commodities as an asset class, the analyst said.

 

Soybeans and wheat were sharply higher in overnight trade and are expected to open day time trading at sharply higher levels which should also supply support to corn prices, a trader said. Soybeans are called to open 25-30 cents higher and wheat is expected to open 30 cents higher, limit up.

 

In Argentina's grain growing regions, scattered showers with amounts of 0.10-0.70 occurred over the past 24 hours with a chance for light to moderate showers possible in northern an eastern areas Friday and Saturday, DTN Meteorlogox Weather said. Rainfall potential is 0.25-0.75 inch and locally heavier. Mainly dry weather is expected on Monday. Temperatures are expected to average below normal through Sunday and near-to-above normal Monday, Meteorlogix Weather said.

 

On daily technical charts, March corn closed lower but nearer the session high. Follow through selling from Wednesday confirmed a bearish key reversal on the daily bar chart with a bearish buying "exhaustion tail" confirmed as well, a technical analyst said. Market bulls have faded and a bearish weekly low close on Friday would provide bears with better downside technical momentum, the analyst said The bull's next upside price objective is to push and close prices above solid resistance at US$5.11 1/4 per bushel. The next downside price objective for market bears remains closing prices below solid support at Thursday's low of US$4.91.

 

First resistance for March corn is seen at US$5.03 1/2 and then at US$5.11 1/4. First support is seen at US$4.95 and then at US$4.91.

 

In other corn news, China's Dalian Commodities Exchange remain closed due to the Lunar New Year holiday.