April 9, 2008

 

CBOT Corn Outlook on Wednesday: Up 5-10 cents; USDA cuts ending stocks

 

 

Corn futures are expected to lead prices higher in the Chicago grain pits Wednesday on a bullishly construed supply/demand report from the U.S. Agriculture Department, analysts said Wednesday.

 

The USDA in its April supply/demand report cut its 2007-08 ending stocks estimate by 155 million bushels to total 1.283 billion, which was more than analysts had expected. A Dow Jones Newswires survey predicted the government would trim stocks to around 1.303 billion bushels.

 

The USDA also lowered its projection of 2007-08 world ending stocks to 102.97 million metric tonnes from 104.03 million tonnes in March, as increased feed use more than offset an increase in production.

 

"Corn will be the leader, as the estimate is on the friendly side. And the lower ending stocks number does tighten things up a bit," said Jack Scoville, analyst and vice president at Price Futures Group in Chicago.

 

Scoville looks for corn to open 5-7 cents a bushel higher, while calls from the CBOT trading floor peg the open at a more bullish 5-10 cents higher.

 

The changes in the corn balance sheet reflect increases in feed and residual use and exports, which more than offset a decrease in corn for ethanol production, the USDA said.

 

The estimate of corn used for ethanol was trimmed by 100 million bushels from last month to 3.1 billion bushels, as the pace of new ethanol plant startups lag earlier projections.

 

The feed and residual use projection was raised by 200 million bushels to total 6.15 billion. The increase reflected the changes in the March 1 quarterly stocks report, which showed larger-than-expected disappearance, the USDA said.

 

Corn exports for 2007-08 were raised by 50 million bushels to 2.5 billion due to the strong pace of shipments and large outstanding sales balances.

 

The USDA also raised the season-average farm price to a range of US$4.10-US$4.50 per bushel, up from a range of US$3.75 to US$4.25 in March, as record use and prospects for smaller-than-expected production in 2008 are expected to support cash and futures prices near record levels through the summer.

 

Last week, the USDA estimated farmers would plant 8% fewer acres to corn this year compared to last, totaling 86 million acres, though analysts widely expect producers to try and plant more corn if the weather allows in the next few weeks.

 

While the report is certainly friendly for corn, traders are keeping their eyes on the weather forecasts for a break in the cool, wet pattern that may allow planting to get started.

 

The eastern Midwest and Delta will see widespread snow, rain and thunderstorms over the next few days, further delaying spring fieldwork. There are some chances for drier conditions in the next six to 10 days, but the forecast models are uncertain, DTN Meteorlogix said.

 

The western Midwest will be dry Wednesday, but rain, thunderstorms and strong winds are likely Thursday and Thursday night.