April 24, 2009

 

CBOT Corn Outlook on Friday: Down slightly as trade eyes crop progress

 

 

Chicago Board of Trade corn futures are expected to open slightly lower Friday following overnight losses amid uncertainty about farmers' planting progress.

 

Corn is called 1 to 2 cents lower. In overnight trade, May corn was down 1 1/2 cents to US$3.79 1/4 a bushel, with July corn down 2 cents to US$3.88.

 

The trade is focusing in on planting progress and weather forecasts in the U.S. corn belt. Significant rain in the forecast for late in the weekend and early next week supported prices Thursday, but the market lacked follow-through buying overnight, analysts said.

 

Despite the forecast for rain, some traders noted that there has likely been significant progress in parts of the western corn belt this week, particularly Iowa, the nation's top corn producer.

 

Traders and analysts are looking ahead to Monday's crop progress report from the U.S. Department of Agriculture.

 

"Next week's price direction will be determined on how much progress was made over the past few days in the western corn belt since its sounds like the eastern belt is still at a standstill waiting for soil conditions to improve," Benson Quinn Commodities analyst Kevin R. Kjorsvik said in a market commentary.

 

A floor trader said the average progress for Monday's report would be 28%. The trade estimates progress between 15% and 20%.

 

Farm Futures analyst Arlan Suderman said in a market commentary that "correlations between planting dates and yields suggests farmers have two weeks to get around two-thirds of the crop in, a task that is difficult, but not impossible."

 

Although export demand has remained strong, feed demand is weak and the trade is concerned about ethanol demand.

 

On Thursday, the California Air Resources Board approved a new low-carbon emissions standard that ethanol supports say unfairly targets corn-based ethanol, the San Francisco Chronicle reported.

 

The new regulation would include land-use changes when calculating ethanol's carbon footprint, a move that could eventually lead to drastically reduced ethanol consumption, according to analysts. An ethanol trade group that has fought the proposal called it unfair, and was not placated by a Wednesday letter from the chair of the Air Resources Board that said the board "firmly believes that corn ethanol will play an important role in helping California achieve the goals" of the new standard.

 

CBOT corn traders have eyed the case as a potential milestone in government policy on ethanol, although many point out that it will not have an immediate effect and should not be a major factor in the corn market.

 

A bullish weekly high close on Friday would provide the bulls with some fresh upside near-term technical momentum, a technical analyst said. The next upside price objective is to push and close prices above solid technical and psychological resistance at US$4 a bushel.

 

The next downside price objective for the bears is to push and close prices below solid technical support at this week's low of US$3.70 a bushel. First resistance for July corn is seen at Thursday's high of US$3.90 3/4 and then at US$3.95. First support is seen at US$3.85 and then at US$3.80.