February 9, 2006

 

CBOT Corn Outlook on Thursday: Steady up 2 cents; export sales, funds eyed

 

 

Corn futures on the Chicago Board of Trade are expected to start Thursday's open auction session steady to firm, responding to strong weekly export sales amid neutral reactions to the U.S. Department of Agriculture supply and demand report.

 

Analysts expect corn futures to open steady to 2 cents per bushel higher.

 

Good weekly export sales for corn should overshadow neutral supply and demand data, as the sales are revealing pent up demand for corn, analysts said.

 

The USDA's 2005-06 marketing year corn weekly export sales were 1,614,000 metric tonnes, 17% above the previous week and 20% over the prior four-week average. Major buyers include Japan, in for 725,200 tonnes, and Mexico, buying 253,300 tonnes. Trader expectations ranged from 800,000 to 1,200,000 tonnes.

 

However, fundamentally the market is still bearish, as the crop report serves as a reminder that we still have a lot of corn to get rid of with a 2.4 billion bushel carryout, said Shawn McCambridge, senior grains analyst with Prudential Financial in Chicago.

 

Traders anticipate the market is more concerned with speculative fund activity and if they will defend long positions, as fundamental factors have been placed on the back burner for the time being. The sales are a positive, but with most of the sales made to traditional buyers, the positive effect of the sales may be short lived, said a CBOT commission house broker.

 

Technical analysts said this week's high of $2.27 1/2 is still strong overhead technical resistance for market bulls to overcome, and a close below $2.15 would provide the bears with fresh downside technical momentum

 

First resistance for March corn is seen at $2.22 and then at $2.24 1/2 - Wednesday's high. First support is seen at $2.20 and then at $2.19.

 

Meanwhile, the USDA projected 2005-06 U.S. corn ending stocks at 2.401 million bushels, above the average trade estimate of 2.384 billion, and 287 million bushels larger than the previous year, USDA said. The revision was 25 million bushels below the January USDA estimate of 2.426 billion.

 

The projection for corn used for ethanol was raised 25 million bushels to 1.6 billion bushels based on continued growth in ethanol production and the expected opening of additional ethanol plants, USDA reported. Corn exports and feed and residual use were unchanged at 1.850 billion bushels 6 billion respectively.

 

In the world balance sheet, ending stocks were edged lower to 128.16 million tonnes from last months 128.26 million. Argentina's production was revised down to 15.5 million tonnes from 16.8 million a month ago and exports were lowered 1.5 million tonnes to 10 million.

 

The USDA announced Thursday private exporters reported the sale of 148,000 metric tonnes of U.S. corn for delivery to unknown destinations. Of that total, 126,000 tonnes are for delivery in the 2005-06 marketing year and 22,000 tonnes are for delivery in the 2006-07 marketing year, USDA said

 

DTN Meteorlogix Weather Service said no significant rain is expected during the next 5-7 days in Argentina but temperatures should not be very hot. The best chance for rain in Brazil in the next 5 to 7 days is from Parana northward. Rio Grange Do Sul may trend drier during this period but it should not be very hot. In South Africa widespread thunderstorms fell again Wednesday, causing some flooding due to the thunderstorm activity of the past 3 days, Meteorlogix said.

 

USDA's Commodity Credit Corporation said late Wednesday it purchased 6,000 metric tonnes of U.S. yellow corn from Cargill for Cape Verde. Delivery is scheduled for Feb. 21-March 2. In overseas markets, corn futures on China's Dalian Commodity Exchange settled higher, tracking Wednesday's gains on the Chicago Board of Trade. The benchmark September 2006 contract rose RMB16 to settle at RMB1,481/tonne, after trading between RMB1,469/tonne and RMB1,495/tonne.