March 2, 2007

 

CBOT Corn Outlook on Friday: Down 6-7 cents; e-CBOT, outside markets influence

 

 

Corn futures on the Chicago Board of Trade are poised for a lower start to day session activity Friday, with the influence of lower overnight prices and weakness in outside markets serving as downside catalysts.

 

Analysts expect corn to open 6 to 7 cents lower.

 

In overnight electronic trading, March corn ended 6 1/2 cents lower at US$4.10 3/4, May corn finished 7 1/2 cents lower at US$4.20 1/2, and December corn was 7 1/4 cents lower at US$4.06.

 

Follow through selling from Thursday's speculative fund sell-off is expected to press prices in early trade, as traders are leery of a continuation of fund liquidation with outside markets - equities, metals and energy - all lower, analysts said.

 

Speculative fund selling was estimated at 20,000 contracts Thursday, with preliminary open interest totals from CBOT down 17,220 lots.

 

Technically inspired activity will once again play a key role in price direction, with speculative funds seemingly in control, as traders are unwilling to challenge the force of the funds if they continue to trim length in the market, a CBOT floor analyst said.

 

However, end of the week positioning may provide underlying support, with end user buying expected to surface, as the market has definitely provided some buying opportunities, he added. Otherwise, futures do not have a lot fresh news to influence prices, with supply and demand data from the outlook conference seen as already discounted in the market, analysts added.

 

A technical analyst said the recent higher volatility at higher price levels is a bearish technical warning signal of a near-term market top. Market bulls need to work to fill a downside price gap on the daily bar chart. It will take a price move above US$4.38 basis May futures to fill that downside price gap and repair this week's near-term chart damage. The next downside price objective is producing a close below solid chart support at Thursday's low of 4.17.

 

First resistance for March corn is seen at US$4.30 and then at US$4.36 1/4. First support is seen at US$4.25 and then at US$4.20.

 

Meanwhile, carryover corn stocks for the 2007-08 marketing year will be 637 million bushels - down from a February prediction of 660 million, USDA economists said in a paper prepared for the USDA's annual Agricultural Outlook Forum. The USDA now expects U.S. farmers to plant 87 million acres of corn in 2007 and produce 12.195 billion bushels of the grain. The USDA maintains in its forecast released Friday that corn use for ethanol in 2007-08 will rise by 50% to 3.2 billion bushels from 2.15 billion in 2006-07.

 

Corn yields, though, are now forecast lower for this year than the USDA predicted last month. The USDA said Friday its new forecast for the average yield is 152.8 bushels per acre, down slightly from its estimate of 153.1 bushels per acre.

 

In other news, China's industrial demand for corn is unlikely to increase sharply in the coming years as the government, worried about food security, isn't in favor of a rapid expansion of processing capacity in the sector, a researcher with a government think tank has said. The concerns will make it difficult to boost the country's industrial demand for corn, said Lan Haitao of the Academy of Macroeconomic Research under the National Development and Reform Commission.

 

In demand news, South Korea's Major Feedmill Group, or MFG, bought 330,000 metric tonnes of optional origin and U.S. corn from trading houses Marubeni and Mitsubishi in a tender concluded late Wednesday, a trader in Seoul said Friday.

 

The Pusan branch of Korea Feed Association bought up to 55,000 tonnes of optional-origin feed corn from Mitsubishi in a tender concluded late Wednesday from trading houses Toepfer and Mistubishi.

 

The Philippine Department of Finance has given the go-ahead for a plan to import around 400,000 metric tonnes of duty-free corn, Finance Secretary Margarito Teves said Friday.

 

In deliveries, a total of 321 notices were placed against the CBOT March future. The last trade date assigned was Feb. 7. A customer account at RJ O'Brien was the primary issuer of 321 lots, with a customer account at LBS Division the principle stopper of 241 lots.

 

The DTN Meteorlogix Weather Service forecast said snow and strong winds with blowing snow will continue to cause transportation problems in the western Midwest Friday, but may improve during the weekend. In the eastern Midwest, colder weather returns to the region during the next 2-3 days, before the outlook turns warmer.

 

In overseas markets, corn futures traded on China's Dalian Commodity Exchange settled lower, with the benchmark September corn contract settled RMB11 lower at RMB1,701/tonne.