March 17, 2006

 

CBOT Corn Outlook on Friday: Flat to up 1 cent; recovering from Thursday

 

 

Chicago Board of Trade corn futures are expected to start Friday's session steady to firmer, following the overnight theme as the market attempts to recover from Thursday's setback.

 

Analysts expect corn to open flat to 1 cent per bushel higher.

 

In overnight electronic trading, May corn was 1/4 cent higher at $2.24 3/4, and July corn was 1/2 cent higher at $2.35 1/2 per bushel.

 

Light pre-weekend short covering should provide mild support to prices, with higher openings expected in the neighboring grain markets seen helping support prices as well, analysts said.

 

A quiet news front with a lack fresh fundamental news to direct prices is seen keeping technical factors in play, with traders on guard for additional selling to emerge if early buying gives way with the allure of testing underlying support a near term objective.

 

However, downside movement is expected to be limited as traders remain cautious sellers, with commodity funds continuing to hold healthy size long positions in the market, said a CBOT commission house broker. Nevertheless, bearish supply side influences, improved soil conditions heading into the planting season and continued concerns over bird flu outbreaks remain a hindrance to upside movement, he added.

 

On the technical side, some near-term chart damage has been inflicted recently, including more Thursday, and prices are in a fledgling two-week-old downtrend on the daily bar chart. The market will need to fill last week's downside price gap above $2.37 3/4 on the daily bar chart to regain upside technical momentum. A close below technical support at Thursday's low of $2.24 would provide the bears with even better downside technical momentum.

 

First resistance for May corn is seen at $2.27 1/2 and then at $2.30. First support is seen at $2.24--Thursday's low--and then at $2.22. Cash corn basis bids were mostly unchanged to higher across the Midwest.

 

DTN Meteorlogix Weather Service said another major rain event is on tap for the Delta and the Ohio River valley during the weekend with snow or rain elsewhere in the eastern Midwest. Soil moisture will be adequate to surplus. In the western Midwest, there is a chance for snow, 5-10 inches and locally heavier in Nebraska and southern Iowa during this weekend into Monday.

 

In demand news, the U.S. Department of Agriculture said Friday private exporters reported the sale of 110,000 metric tonnes of U.S. corn to South Korea in the 2005-06 marketing year.

 

South Korea's Nonghyup Feed Inc., or NOFI, bought 155,000 metric tonnes of optional-origin corn for March-May delivery in a tender concluded late Thursday, a company official said Friday. Trading house Bunge will supply 55,000 tonnes, while trading house Cargill will supply 100,000 tonnes.

 

In other news, Israeli officials suspect about 11,000 turkeys have died in what is the country's first outbreak of the dangerous H5N1 strain of bird flu. Officials will decide whether to destroy tens of thousands of other birds, they said Friday.

 

Meanwhile, Philippine feed mills are expected to import more corn and soymeal in 2006, as the absence of bird flu in the country so far has kept poultry consumption high, while there is an expected shortfall in domestic corn output, said Ricardo M Pinca, vice-president of the Philippine Association of Feed Millers, Inc.

 

In overseas markets, corn futures on China's Dalian Commodity Exchange settled lower, pressured by the market's concern that bird flu will continue to weigh on local feed demand, which is still corn's major usage, analysts said. The benchmark September 2006 contract settled RMB17 lower at RMB1,389/tonne.