February 9, 2010

 

CBOT Corn Outlook on Tuesday: Up 5-7 cents on USDA report, weaker dollar

 

 

Chicago Board of Trade corn futures are expected to open higher Tuesday following overnight gains and a friendly supply and demand report from the government.

 

Corn is called 5 to 7 cents higher following the U.S. Department of Agriculture's supply and demand report, which projected 2009-10 U.S. ending stocks at 1.719 billion bushels, down slightly from the average analyst estimate of 1.748 billion bushels. The USDA had estimated carryout at 1.764 billion bushels in January.

 

"Overall, the numbers from the USDA are on the low side for ending stocks for corn and soybeans," said Jerry Gidel, analyst for North America Risk Management Services.

 

As many expected, the USDA cut its export projection by 50 million bushels, but that was countered by a 100-million-bushel increase in projected ethanol usage.

 

The USDA lowered its world ending stocks projection, to 134.0 million metric tonnes from a February estimate of 136.2 million, which analysts said was supportive to the market.

 

The report hiked Argentina production, as expected, to 17.2 million metric tonnes, up from 15.0 million in January. But it left Brazil's production unchanged at 51 million metric tonnes. Many analysts were expecting an increase there as well.

 

The market was higher overnight, extending gains from Monday. March corn was up 3 cents to US$3.59 per bushel and May corn was up 3 cents to US$3.70 1/2.

 

Analysts added that a weaker dollar could add to the supportive tone Tuesday.

 

Although a few traders and analysts say the market seems to have solid support just below US$3.50, technical analyst Jim Wyckoff said "there are no early technical clues that a market bottom is close at hand."

 

The next downside price objective for the bears is to push and close March prices below solid technical support at US$3.40 a bushel, Wyckoff said. Bulls' next upside price objective is to push prices above solid technical resistance at last week's high of US$3.68 1/4 a bushel.

 

First resistance for March corn is seen at US$3.59 and then at Monday's high of US$3.62, the technical analyst said. First support is seen at Monday's low of US$3.53 1/2 and then at US$3.50.

 

End-user buying should continue to limit the market's downside, traders said. But gains will likely be capped by the large U.S. supplies and expectations of a big South American crop, they said.