February 10, 2009

Chicago Board of Trade corn futures are expected to open 3 to 5 cents higher Tuesday following a government report that left projected ending stocks unchanged and sliced South American production, analysts said.

 

Most of the market had expected the government to increase ending stocks due to continued weak demand. Instead, the U.S. Department of Agriculture left 2008-09 corn ending stocks unchanged at 1.79 billion bushels. Analysts had projected on average a carryout of 1.838 billion bushels.

 

"Corn being left unchanged probably gives you a little support there," said Mark Schultz, chief analyst for Northstar Commodity. "That doesn't surprise me, but the fact that they didn't raise it, when most of the trade was looking for an increase, probably gives you a friendlier tone."

 

The USDA lowered production in Argentina by 3 million tonnes "as continued drought and heat during late January further reduced prospects for yields and harvested area in key central growing areas." The cut was larger than many traders and analysts had expected.

 

Brazil production was lowered by 2 million tonnes, and Paraguay production was cut by 0.8 million tonnes.

 

Price Futures Group vice president Jack Scoville said that even though a cut in South American production was forecast, "most analysts thought the USDA would be conservative in their revision at this point."

 

The market continues to monitor weather in South America, particularly Argentina. The DTN Meteorlogix forecast calls for scattered showers in Argentina Tuesday, with dry conditions the rest of the week, through Saturday.

 

Schultz said the weather would be the key supportive factor Tuesday for corn and soybeans.

 

"I would suspect that we could still see some further declines coming out of South America eventually," Schultz added.

 

In export news, Taiwan's Member Feed Industry Group is seeking up to 60,000 metric tonnes of U.S. corn in a tender to be concluded later Tuesday, a group official said.

 

March corn was down 1/2 cent to US$3.76 1/4 per bushel in overnight trading and May corn was down 1 cent to US$3.87. The March contract has been trading on both sides of key moving averages recently, and ended overnight trade below the 20-day and 50-day averages.

 

The next downside price objective is to push and close prices below solid technical support at last week's low of US$3.55 3/4 a bushel, a technical analyst said. The next upside price objective is to push and close prices above major psychological resistance at US$4.

 

First resistance for March corn is seen at US$3.80 and then at Monday's high of US$3.83, the technical analyst said. First support is seen at Monday's low of US$3.72 1/2 and then at US$3.70.