March 11, 2009

Chicago Board of Trade corn futures are expected to open slightly higher Wednesday following a cut in the government's projected 2008-09 ending stocks, analysts said.

 

Corn is called 2 to 3 cents higher, as supportive domestic carryout numbers are balanced by bearish world numbers.

 

The USDA pegged U.S. carryout at 1.740 billion bushels, down from a February projection of 1.790 billion. Analysts had estimated on average a carryout of 1.811 billion bushels.

 

Don Roose, president of U.S. Commodities in West Des Moines, said it was a little bit of a surprise that the government cut U.S. ending stocks.

 

"That came from a 100 million (bushel) increase in ethanol, which, with a new ag secretary, I think that probably can be expected," Roose said. "We're on a path to increase biofuel demand."

 

The growth in ethanol demand made up for a 50-million-bushel cut in export demand. The USDA noted in the report improving blender incentives and higher ethanol use.

 

"Blender margins have become increasingly favorable since late February as gasoline prices have risen relative to those for ethanol," The USDA said in the report.

 

But the report also increased world corn ending stocks, to 144.6 million metric tonnes, up from 136.7 million last month. This will limit corn's rally, Roose said.

 

"We know to clear out some of out stocks we're going to have to consume domestically or export them," Roose said. "Well, that's the same theory the other countries have."

 

He added that bearish USDA wheat carryout estimates will also limit corn, while equities offer support.

 

A floor trader noted the surprising cut in U.S. corn carryout but said that overall he was "not too excited about the report." He said lower crude oil could limit the market's upside potential.

 

In overnight trading, May corn was down 1 1/4 cents to US$3.74 1/4 per bushel and July corn was down 2 1/2 cents to US$3.83.

 

Technically, a nine-week-old downtrend that was in place on the daily bar chart was negated Tuesday, a technical analyst said.

 

The next downside price objective is to push and close May prices below solid technical support at last week's low of US$3.44 1/2 a bushel, the technical analyst said. The next upside price objective is to push and close prices above solid technical resistance at US$3.93.

 

First resistance for May corn is seen at US$3.80 1/2 and then at Tuesday's high of US$3.84, the technical analyst said. First support is seen at US$3.70 and then at Tuesday's low of US$3.64 1/4.

 

In other news, there were 637 deliveries reported Wednesday against the March contract.