March 11, 2008

 

CBOT Corn Outlook on Tuesday: Up 3-5 cents after USDA report on firm soy, wheat

 

 

Chicago Board of Trade corn futures are expected to begin trading 3 to 5 cents higher Tuesday, supported by a firm tone in overnight activity and spillover support from an expected higher start in both soybeans and wheat, after a neutral U.S. Department of Agriculture report, analysts said.

 

Soybeans are expected to open 20 to 25 cents higher and wheat is called to open 10 to 20 cents higher.

 

In overnight electronic trading ahead of the report, May corn gained 5 3/4 cents to US$5.65 3/4 per bushel and December rose 5 1/2 cents to US$5.84 1/2. Electronic trading volume in May was over 11,000 contracts.

 

The U.S. Department of Agriculture reported that 2007-08 corn ending stocks were 1.438 billion bushels in March, unchanged from the previous report and slightly above the average analyst estimate of 1.435 billion bushels.

 

"Corn should be a follower, as the report did not provide anything out of line," said Bill Nelson, associate vice president at Wachovia Securities in St. Louis.

 

"However, the lower U.S. dollar in conjunction with record crude oil prices should lend support to corn," he said.

 

The USDA did raise its estimate of the 2007-08 world corn carryover to 104.0 million metric tonnes from the 101.9 million estimated last month.

 

2007-08 soybean ending stocks were reduced by 20 million bushels and wheat ending stocks by 30 million bushels and both are expected to trade higher and provide spillover support to corn.

 

Corn will follow the direction of soybeans and wheat, as well as the outside markets, a floor trader said. With the lack of any changes in the balance sheet, corn will look to the other grains as well as the outside markets ahead of the planting intentions report due out at the end the month, the trader added.

 

Ahead of the grain opening, nearby crude oil futures are steady.

 

On daily technical charts, July corn closed sharply higher Monday and hit limit up after corn traded a big and bullish "outside day" on the daily bar chart, a technical analyst said. Corn traded limit down early in the session before recovering to trade higher ahead of the USDA's supply and demand report Tuesday. Corn bulls still have the solid near-term technical advantage and their next upside price objective is to push and close prices above major psychological resistance at the contract high of US$5.86 The next downside price objective is to close prices below solid support at last week's low of US$5.58 1/4.

 

First resistance for July corn is seen at US$5.86 and then at US$5.90. First support is seen at US$5.71 and then at US$5.66 3/4.

 

In other corn news, corn futures on China's Dalian Commodity Exchange settled higher with the September contract up RMB26 at 1,834 RMB/tonne.