March 4, 2009

Chicago Board of Trade corn futures are expected to open 2-4 cents higher Wednesday, following overnight gains and positive equities futures.

 

In overnight electronic trading, CBOT March corn added 3 1/2 cents to US$3.47 a bushel; May corn rose 4 3/4 cents to US$3.55 1/4; and July corn gained 4 3/4 cents to US$3.64 1/2.

 

U.S. stock futures strengthened Wednesday, in line with rallies on foreign exchanges following the overseas release of a Chinese gauge of manufacturing sentiment and a U.K. services-sector poll, which each rose for the third straight month.

 

The corn market should remain range-bound and needs a recovery in the outside markets to sustain rallies, a CBOT floor trader said.

 

"Today we're getting it," he said, pointing to gains in crude oil and Asian equities markets.

 

Firm cash markets portend a "less bearish" outlook, bolstered by a "premium buyer" supporting July and December futures contract levels, he added.

 

March corn deliveries totaled 1,570 lots. A customer account at JPMorgan was the primary issuer at 1,176 lots. Bunge Chicago's house account was primary stopper at 442 lots.

 

Technical indicators still favor the bears, a market technician said, noting a two-month-old downtrend remains in place on the daily bar chart.

 

The bears are pushing to close May corn below solid longer-term technical support at Tuesday's low of US$3.47 1/4 and then at this week's low of US$3.44 1/2.

 

The bulls are aiming to pierce solid technical resistance at US$3.70, he said, pegging first resistance at Tuesday's high of US$3.54 1/4 and then at US$3.59.

 

Talks between Argentina's government and farmers progressed Tuesday.

 

Farmers and the government came to a partial accord on the issues of meat, wheat and milk after more than five hours of talks to avoid a repeat of last year's crippling strikes.

 

The deal had "unstuck" stalled negotiations, although "more work is needed," Rural Confederation President Mario Llambias said at the press conference after the talks.

 

Farmers will meet with government officials again next week to continue the talks, Interior Minister Florencio Randazzo said at a press conference following the talks Tuesday.

 

The agreements centered on providing farmers a minimum price for their wheat, loosening wheat export controls, and raising subsidies and export quotas on beef and dairy products, Production Minister Debora Giorgi said.

 

The government remained firm on the issue of soy export taxes, which will remain at 35%, Randazzo said.

 

The CBOT trader voiced no confidence that Argentina's issues were moving toward resolution. He said the country's political situation will continue to be a leading factor in the U.S. market, especially until the U.S. planting season is underway.

 

In other global trade news, corn prices in China inched up a little in the week to Wednesday, as continued purchases by the government from the country's biggest growing areas to prop up prices showed results.

 

Rates in Changchun in Jilin province, a major producer, were around RMB1,450 a metric tonne, up RMB30/tonne from a week earlier. It also rose by the same extent in Dalian in Liaoning province to RMB1,570/tonne.

 

In Shekou port in Guangdong province, a key sales point, it increased RMB10 from a week ago to RMB1,630/tonne.

 

"Corn prices are largely being supported by the 40-million-tonne government buying plan, and that's why we are seeing the steady rise this week," said Xu Wenjie, an analyst with Tianma Futures Co.

 

China will buy more corn to support local prices if there is such a need, a senior government official said Wednesday.