February 10, 2006

 

CBOT Corn Outlook on Friday: Weaker start on overnight softness

 

 

Corn futures at the Chicago Board of Trade are called to open weaker on Friday, based on overnight weakness and ideas Thursday's rally was overdone, but that weakness could be tempered if index and commodity funds return as buyers.

 

Corn futures are called to open 2-3 cents a bushel lower.

 

Most-active March corn fell 2 3/4 cents to $2.22 3/4 a bushel in overnight trade.

 

On Thursday's corn futures rallied 4 1/4 cents to $2.25 1/2 on fund buying, analyst said.

 

Ideas that the market is overbought after Thursday's rally following a larger-than-expected carryout figure from the U.S. Department of Agriculture could lend light pressure Friday. 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.

 

"There wasn't anything in the (supply/demand) report that would have gotten us up" that far, said Sid Love of Joe Kropf/Sid Love Consulting, Overland Park, Kan.

 

But Love and other analysts said if the funds are interested in buying a lower open, that could temper any weakness. "If the funds think $2.20 to $2.30 corn is cheap" they'll buy it, he said.

 

DTN Meteorlogix said in Argentina's corn belt, no significant rain is forecast for the next five to seven days, but there won't be much heat. Temperatures are forecast to turn hot next Thursday and Friday.

 

Brazilian corn-growing areas, the best chance for rain during the five to seven day period is from northern Parana northward. Rio Grande Do Sul may trend drier during this period but it should not be very hot.

 

"The weather still bears watching," said Vic Lespinasse, floor broker at A.G. Edwards. "But the main thing we're watching is what the funds do. They could muscle the market either way."

 

In bird flu news, Chinese researchers suggest that recent bird flu outbreaks there could stem from contamination spread by dead poultry, the Health Ministry said Friday. The government said Wednesday that a 26-year-old woman in an area with no reported outbreaks in poultry of the virulent H5N1 flu strain had become China's latest human case of bird flu.

 

The USDA is expected to release baseline production numbers Friday ahead of next week's annual USDA Outlook Forum. "We're all expecting lower acreage, but those numbers were created in the fall and they're really just for the trend. The big numbers are next week," Love said.

 

China could become a net importer of corn in two years as a booming domestic processing sector as well as the government's efforts to encourage the use of corn in the production of ethanol analysts at China National Grain & Oils Information Center, a unit of the State Grain Administration said.

 

According to CNGOIC estimates, the total domestic consumption of corn in the 2005-06 crop year ending September is expected to reach 130.2 million tonnes, up from 125 million tonnes in the previous year. That includes 7.3 million tonnes for food, 91 million tonnes for feeds production, and 22 million tonnes for industrial processing including ethanol production, which is up from 18 million last year.