March 7, 2007

 

CBOT Corn Outlook on Wednesday: Down 2-3 cents, carryover selling from Tuesday

 

 

Chicago Board of Trade corn futures are seen starting Wednesday's day session on the defensive, pressured by follow through selling from Tuesday's weak close amid a lack of fresh bullish inputs.

 

Analysts expect corn to open 2 to 3 cents lower.

 

In overnight electronic trading, March corn ended 3 cents lower at US$4.09 1/2, May corn finished 2 1/2 cents lower at US$4.19 1/2, and December corn was 3/4-cent lower at US$4.05 3/4.

 

A quiet news front and the absence of fresh supportive features are expected to promote a lower start, with choppy, sideways trade anticipated if speculative funds don't step up to the plate, analysts said.

 

The funds have lightened up their activity following recent volatile action, and traders are expected to take a cautious approach to trade heading into Friday's supply and demand report, analysts added. The industry is not expecting any market moving developments to emerge from the report, but traders will remain on guard for possible surprises, a CBOT floor trader said.

 

U.S. Department of Agriculture is scheduled to release its March supply and demand report Friday at 7:30 a.m. CST (1330 GMT). The average of estimates from a Dow Jones Newswires survey pegged corn 2006-07 ending stocks at 763 million bushels, up from February's estimate of 752 million. The estimates fell within range of 748 million to 802 million bushels.

 

Nevertheless, the market maintains long range bullish fundamental outlooks and downside movement is seen limited without speculative fund liquidation. Technically inspired trade is expected to be a featured attraction in the absence of fresh news.

 

A technical analyst said market bulls are still on the defensive and need to work to fill a downside price gap on the daily bar chart that was created on Feb. 27 Basis May futures. It will take a price move above US$4.38 to fill that downside price gap and repair recent near-term chart damage. The next downside price objective is producing a close below solid chart support at this week's low of US$4.13.

 

First resistance for March corn is seen at US$4.25 and then at Tuesday's high of US$4.28 1/2. First support is seen at US$4.20 and then at US$4.15.

 

The DTN Meteorlogix weather forecast said a more favorable weather pattern for transportation is store for the western U.S. Midwest this week. Meanwhile in the eastern Midwest, a warmer weather pattern should develop during the next few days.

 

In deliveries, a total of 172 notices were placed against the CBOT March future. The last trade date assigned was February 27. A customer account at Man Professional Clearing issued 118 lots, and the house account at Fortis was the primary stopper of 97 lots.

 

In other news, South Africa's corn yields for the 2006/07-season rose by 21,000 metric tonnes last week to 6.123 million tonnes, official data showed Wednesday. The South African Grain Information Service's weekly harvest report showed that of a total 4.065 million tonnes of white corn harvested, 65.1% was white corn grade one while totally spoiled white corn was at 0.2%. White corn grade two and three were at 27.2% and 7.5% respectively.

 

China's corn prices in major producing regions were largely stable in the week to Wednesday, as processing plants were reluctant to purchase amid a large amount of stocks.

 

China's major corn-producing region has begun a trial program to grow corn in the Philippines, Lv Weifeng, party secretary of the Agriculture Bureau in Heilongjiang province, said Wednesday. Provincial companies will develop a total of 133,333 hectares to plant with corn there, Lv said on the sidelines of the National People's Congress.

 

Meanwhile, Mexican officials Tuesday told U.S. Agriculture Secretary Mike Johanns their country will join Canada's trade complaint against U.S. corn subsidies if the World Trade Organization orders a formal investigation of the issue. Mexican Economy Secretary Eduardo Sojo said his country would join the complaint - now supported by the E.U., Australia, Argentina and Brazil - if the WTO orders the establishment of a dispute settlement panel. That could happen if the dispute isn't worked out during a consultation period.

 

In overseas markets, corn futures traded on China's Dalian Commodity Exchange settled mostly lower. The benchmark September corn contract settled RMB5 lower at RMB1,701/tonne.