April 8, 2009

 

CBOT Corn Outlook on Wednesday: Lower on technical weakness, pre-report trade

 

 

Chicago Board of Trade corn futures are expected to open lower Wednesday following overnight losses, amid technical weakness and positioning ahead of Thursday's supply and demand report, analysts said.

 

Corn is called 3 to 5 cents lower. In overnight trading, May corn was down 4 1/2 cents to US$3.91 3/4 per bushel and July corn was down 5 1/2 cents to US$4.01.

 

The market is in the midst of a correction after recent gains, and Thursday's looming supply and demand report could prompt some modest long liquidation, an analyst said.

 

"We're technically weak, I think that's going to put a little pressure on the market today," said Shawn McCambridge, senior grains analyst for Prudential Bache.

 

The U.S. Department of Agriculture will release its supply and demand report Thursday at 8:30 a.m. EDT. Although no major changes are expected, "there's enough uncertainty to squeeze out any of the longs that are still in the market at this point," McCambridge said.

 

Analysts on average project the USDA will peg 2008-09 corn ending stocks at 1.731 billion bushels, down slightly from a March projection of 1.740 billion. Ending stocks for 2007-08 were 1.624 billion bushels.

 

Estimates from the 14 analysts surveyed ranged from 1.675 billion to 1.954 billion. But the bulk of the estimates - 11 of the 14 - were between 1.690 billion and 1.740 billion.

 

"Thursday's WASDE is likely to be a non-event with no significant changes expected in the USDA's balances," Morgan Stanley said in a research note. "The market is likely to keep their focus on the allocation of acreage and pace of planting in the coming weeks."

 

The trade is monitoring U.S. corn belt weather, and the focus will intensify following Thursday's report. Analysts say U.S. corn belt weather is an underlying supportive influence, although they add that it's too soon to have much concern.

 

"The weather doesn't seem nearly as bad as last year and (Wednesday's) action indicates traders aren't too concerned for the time being," said Mark Gold, managing partner for Top Third Ag Marketing.

 

Outside markets appeared to be a mixed influence Wednesday, analysts said.

 

Prices are still in a five-week-old uptrend on the daily bar chart, a technical analyst said.

 

The next upside price objective is to push and close May prices above solid technical resistance at US$4.18. The next downside price objective for the bears is to push and close prices below solid technical support at last week's low of US$3.76 3/4 a bushel.

 

In export news, South Korea - a major Asian corn importer - isn't expected to be active in the market over the next few weeks, as feedmillers don't find corn prices attractive.

 

"Even though freight costs are low, corn prices are a bit too high at the moment. We are perfectly willing to wait a while before placing fresh orders," said a trader in Seoul.

 

South Korea has been a consistent buyer of U.S. corn in recent weeks.

 

In other markets, corn prices in China's major producing areas were mostly stable in the week to Wednesday, but prices in some areas were higher on thin supply. (Prasenjit Bhattacharya contributed to this report.)