March 10, 2006

 

CBOT Corn Outlook on Friday: Down 1/2-1 cent; USDA report non-event

  

 

Corn futures on the Chicago Board of Trade are seen starting Friday's open auction session modestly lower, as attention shifts to U.S. plantings and weather following a non-eventful supply and demand report from U.S. Department of Agriculture.

 

Analysts expect corn to open 1/2 to 1 cent per bushel lower.

 

The USDA's report did not provide any surprises, and attention will now shift to U.S. plantings and weather, with adequate risk premium in the market, said Don Roose, president U.S. Commodities in West Des Moines, Iowa.

 

Traders are putting a bearish slant on the market, as improved soil moisture across the Midwest, USDA reports reiterating abundant U.S. and world supplies, and weakness in outside markets are expected to attract selling pressure.

 

However, traders remain cautious of pressuring futures on price breaks amid fears that commodity fund buying could reemerge at lower levels. Analysts say futures continue to experience selling exhaustion below the US$2.30 level basis May futures and there doesn't seem to be enough supportive news to generate and strong upside moves.

 

Technical analysts said market bulls need to fill this week's downside price gap on the daily bar chart to get back in the technical driver's seat, which means pushing prices back above US$2.37 3/4. 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$2.32 1/2 - Thursday's high - and then at US$2.34. First support is seen at US$2.30 and then at US$2.29 - Thursday's low.

 

The USDA projected 2005-06 U.S. corn ending stocks at 2.351 billion bushels, above the average trade estimate of 2.338 billion, and 237 million bushels larger than the previous year, USDA said. The revision was 50 million bushels below the February USDA estimate of 2.401 billion due to increased exports.

 

The projection for corn exports was raised to 1.900 billion bushels due to larger-than-expected U.S. sales to Asian markets, USDA said. In the world balance sheet, ending stocks were edged higher to 130.2 million tonnes from last months 128.16 million.

 

Meanwhile, Informa Economic pegs US corn seedings at 80.091 million acres, down from 2004-05 plantings of 81.8 million acres. USDA is scheduled to release its prospective plantings figures March 31. Cash corn basis bids were mostly unchanged across the Midwest.

 

DTN Meteorlogix Weather Service said episodes of rain and thunderstorms will greatly improve the top and sub soil moisture for the upcoming corn and soybean planting season.

 

In deliveries, a total of 110 delivery notices were posted against the March future. The primary issuer was a customer account at ABN Amro with 100 lots. The house account at Term Commodities stopped all 110 lots. The last date assigned was March 2.

 

In overseas markets, corn futures China's Dalian Commodity Exchange settled slightly higher. Most contracts posted intraday highs at the opening on CBOT corn gains, but long liquidation trimmed gains. The benchmark September 2006 contract settled RMB3 higher at RMB1,435/tonne, after trading between RMB1,428/tonne and RMB1,445/tonne.