March 10, 2010

 

CBOT Corn Outlook on Wednesday: Down 3-5 cents as USDA increases carryout

 

 

Chicago Board of Trade corn futures are expected to open lower Wednesday after the U.S. Department of Agriculture issued bearish supply and demand estimates.

 

Corn is called 3 to 5 cents lower following the government's report.

 

The government projected 2009-10 ending stocks at 1.799 billion bushels, up from a February estimate of 1.719 billion bushels and higher than the average analyst guess of 1.716 billion.

 

The estimates include a slight revision to the size of the crop, to 13.131 billion bushels, down from a January estimate of 13.151 billion. But analysts were expecting a greater reduction, with guesses averaging 13.081 billion.

 

The government's world carryout projection was also bearish, climbing to 140.2 million metric tonnes, up from a February estimate of 134 million.

 

"The big jolt that I saw coming in here, world corn is up four-and-a-half percent. That's a little bit bearish," said Country Hedging analyst Sterling Smith. "I think (U.S. carryout), combined with the world number, that could prove to be a little bit heavy for corn."

 

In overnight trade, March corn was down 1 3/4 cents to US$3.57 per bushel and May corn was down 1 3/4 cents to US$3.67 1/4.

 

Given the larger ending stocks, the "trade will even less concerned with losing a few corn acres" in favor of soybeans this year, said Karl Setzer, commodity trade advisor with MaxYield Co-op.

 

Wet weather and warmer temperatures are causing flooding in parts of the western and northern Midwest, which heightens concerns about planting delays this spring, but many traders say that if the flooding is inevitable, it is better for it to happen now rather than in April.

 

Technically the market is also under pressure, analysts say. The next downside price objective for the bears is to push and close May prices below solid technical support at the February low of US$3.59 a bushel, a technical analyst said. The bulls' next upside price objective is to push and close prices above solid technical resistance at US$3.80 a bushel.

 

First resistance for May corn is seen at US$3.72 and then at Tuesday's high of US$3.75 1/4, the technical analyst said. First support is seen at Tuesday's low of US$3.68 1/4 and then at US$3.65.