March 1, 2007

 

CBOT Corn Outlook on Thursday: Down 4-5 cents; e-CBOT, equity market weakness

 

 

Chicago Board of Trade corn futures are poised to open Thursday's day session on weak footing, taking its cue from overnight trade amid the absence of fresh supportive news and weakness in outside equity markets.

 

Analysts expect corn to open 4 to 5 cents lower.

 

In overnight electronic trading, March corn ended 4 1/2 cents lower at US$4.20 3/4, May corn finished 4 1/4 cents lower at US$4.31 1/4, and December corn was 5 3/4 cents lower at US$4.14 1/4.

 

Overnight weakness in international equity markets have traders on guard for potential speculative fund selling, similar to the events that shaped Tuesday's heavy selling pressure, analysts said.

 

Speculative funds continue to hold large long positions in the market and margin calls from other investments may trigger some profit taking in grains, a CBOT floor analyst said.

 

Stocks on the Shanghai exchange experienced fresh declines overnight, dropping 2.9%. Stock futures in the U.S. are lower in early market action.

 

The absence of fresh supportive news is expected to aid the market's lower tone, with lower than expected weekly export sales and the lack of any surprises from the U.S. Department of Agricultures outlook forum keeping technical factors in play, traders said.

 

Nevertheless, traders say the market continues to maintain a long tern bullish underlying theme that should limit downside potential. The market will remain in a choppy range looking for support until a clear picture of plantings and spring weather can be ironed out in the future, a CBOT floor analyst said.

 

A technical analyst said May corn prices Wednesday closed near the session high and almost filled Tuesday's big downside price gap on the daily bar chart. It will take a price move above US$4.38 to fill the downside price gap and repair this week's near-term chart damage. The next major upside technical price objective is to produce a close above solid chart resistance at US$4.50. The next downside price objective is producing a close below solid chart support at this week's low of 4.20.

 

First resistance for May corn is seen at US$4.38 and then at US$4.40. First support is seen at US$4.30 and then at Wednesday's low of US$4.24 1/2.

 

USDA said net weekly export sales for corn were 356,600 metric tonnes. 2006-07 sales totaled 318,000 tonnes, a marketing year low. The sales were down 61% from the prior week and 68% under the prior 4-week average. Trade estimates called for commitments in the 600,000 to 800,000 tonne range. The biggest buyers were Egypt, buying 228,300 tonnes, and Japan, buying 104,000 tonnes.

 

Meanwhile, USDA now expects U.S. farmers to plant 87 million acres of corn in 2007 and produce 12.2 billion bushels of the grain, the department's Chief Economist Keith Collins said Thursday at the annual Agricultural Outlook Forum. The acreage and production estimates are up from the USDA's baseline projections, which were released on Feb. 14. In the baseline projections, the USDA had estimated 2007-08 corn area at 86 million acres and production at 12.065 billion bushels.

 

In deliveries, a total of 89 notices recirculated against the CBOT March future. The last trade date assigned was December 14. A customer account at FCStone was the primary issuer of 50 lots, with a customer account at RJ O'Brien the principle stopper of 41 lots.

 

The DTN Meteorlogix Weather Service forecast said the western Midwest will endure snow, ice and rain Thursday and snow into Friday, likely meaning further transportation delays. In the eastern Midwest, the Illinois River will see mostly rain from the current system, although the precipitation may change briefly to snow before ending. Colder temperatures will emerge behind this system but the long range forecast is warmer again, Meteorlogix reports.

 

In Argentina, thunderstorms linger into early Thursday and then it should turn drier. Soil moisture should be adequate for needs of crops. However, wet conditions may hamper any field work activities, Meteorlogix added in the forecast.

 

In overseas markets, corn futures traded on China's Dalian Commodity Exchange settled higher, following gains on CBOT. The benchmark September corn contract settled RMB12 higher at RMB1,712/tonne.