March 9, 2006

 

CBOT Corn Outlook on Thursday: Up 1-2 cents; technical recovery, export sales

  

 

Corn futures on the Chicago Board of Trade are seen starting Thursday's session on firm footing, in step with overnight action, garnering support strong weekly export sales and ideas the market is overdue for a bounce after stumbling from last week's highs.

 

Analysts expect corn to open 1 to 2 cents per bushel higher.

 

In overnight electronic trading, March corn was 1 cent higher at US$2.20, May corn was 1 1/2 cent higher at US$2.29 1/2, and July corn was 1 cent higher at US$2.39 1/4 per bushel.

 

Futures are poised to edge higher in a recovery from recent losses, with higher-than-expected weekly export sales and firm outside inflationary markets helping to foster upside strength, analysts said.

 

The U.S. Department of Agriculture said 2005-06 corn weekly export sales totaled 1,424,300 metric tonnes, two-and-one-third times the previous week and 16% above the prior four-week average. Major buyers include Japan, in for 890,200 tonnes, and Mexico, buying 250,600 tonnes. 2006-07 export sales totaled 9,400 tonnes. Trader expectations ranged from 700,000 to 900,000 tonnes.

 

However, speculative funds continue to hold sizable longs in the market, leaving futures vulnerable to a sell off if follow through momentum fails to emerge, particularly with the allure of eclipsing underlying support at the US$2.27 1/2 per bushel level basis May futures a near-term technical objective, said a CBOT commission house broker.

 

In addition, traders say it will be tough to rally prices if wheat maintains a bearish theme during the day. CBOT wheat futures are expected to open 2-3 cents lower.

 

Technical analysts said the market is gaining fresh downside technical momentum. A close below technical support at US$2.27 1/2 would provide better downside technical momentum to suggest that a near-term top is in place.

 

First resistance for May corn is seen at US$2.30 1/4 - Wednesday's high - and then at US$2.32. First support is seen at US$2.27 1/2 and then at US$2.25.

 

Trade positioning ahead of Friday's supply and demand report is expected to emerge at some point in the day as well. The USDA's report is scheduled for release at 7:30 CST (1330 GMT) Friday. The average of trade guesses from 14 analysts surveyed by Dow Jones Newswires peg 2005-06 estimated ending stocks at 2.338 billion bushels, a 63 million bushel reduction from February's forecast. The estimates ranged from 2.250 billion bushels to 2.401 billion bushels.

 

Cash corn basis bids were mostly unchanged across the Midwest.

 

DTN Meteorlogix Weather Service said episodes of light to moderate precipitation will favor the southern and eastern areas of the U.S. Midwest over the next five days. Some of this may be snow. Colder temperatures are expected later in the five-day period and early in the 6-10 day period before turning warmer again.

 

In news, U.S. Grains Council's senior director in China said in an online report, China may not issue fresh corn export quotas soon, as local demand remains strong and domestic prices are rising. He added that unsubstantiated reports indicate that no new export quotas are currently being considered by China.

 

In deliveries, a total of 135 delivery notices were posted against the March future. The last date assigned was March 2.

 

In overseas markets, corn futures China's Dalian Commodity Exchange settled slightly lower on long liquidation, but technical support at RMB1,400/tonne is strong, analysts said. The benchmark September 2006 contract settled RMB7 lower to RMB1,432/tonne, after trading between RMB1,424/tonne and RMB1,441/tonne.