May 11, 2007

 

CBOT Corn Outlook on Friday: 4-6 cents higher; supportive USDA stocks report

 

 

Chicago Board of Trade corn futures are predicted start trading 4 to 6 cents higher Friday after a supportive U.S. Department of Agriculture ending stocks estimate for the 2007-08 crop year, analysts said.

 

In overnight electronic trading before the report, May corn fell 1 3/4 cents to $3.44 per bushel, July fell 2 1/2 cents to $3.52 and December slipped 2 cents to $3.54 1/2. E-CBOT volume in July was 4,048 contracts.

 

The USDA estimated 2007-08 ending stocks at 947 million bushels, below the 1.058 billion average analyst estimate and near the 937 million bushels forecast for the 2006-07 crop year.

 

The government projects that U.S. farmers will produce 150.3 bushels of corn per acre, with a crop size of 12.460 billion bushels.

 

Corn used for ethanol is expected to increase to 3.4 billion bushels in 2007-08, up from 2.150 billion in 2006-07.

 

"Essentially, there's no build up in carryover this year thanks to yield reduction and ethanol. (It's an) extremely friendly report for feed grains. The ethanol was not only increased, it was increased substantially," said Mike Zuzolo, chief analyst at Risk Management Commodities in West Lafayette, Indiana.

 

2006-07 old crop ending stocks were increased to 937 million bushels, up from the 877 million estimated in April as the USDA lowered export usage by 50 million bushels.

 

Corn should be higher and could see bigger gains as the ending stocks estimate was lower than expected and corn has the entire growing season ahead of it and needs to have favorable weather to produce the amount needed to supply export and ethanol demand, a floor trader said.

 

Mostly dry weather is expected in much of the U.S. Midwest through Monday, said DTN Meteorologix Weather with scattered showers and thundershowers expected in northern sections on Tuesday. Temperatures are expected to be near-to-above normal Sunday and Monday. Meteorologix said

 

On daily technical charts, July hit a fresh six-month low Thursday and if follow through selling occurs Friday there could be some serious chart damage, a technical analyst said. The next downside objective for bears' is closing prices below US$3.50 per bushel, while bulls would regain fresh upside momentum with a close above US$3.77 which would fill on the upside this week's downside price gap, the analyst said.

 

First resistance for July is seen at US$3.60, then at US$3.767 1/2. First support is seen at US$3.54 and then at US$3.50.

 

Deliveries posted against the May future were 716 contracts. Large issuers included the customer account of Man Professional Clearing, which issued 284 contracts and the customer account of Kottke, which issued 132 contracts. Large stoppers included the customer account of RJ O'Brien, which stopped 159 contracts, and the house account of ADM Investor Services, which stopped 131 contracts. The last trade assigned was May 10. Preliminary open interest in May is 1,525 contracts.

 

In other corn news, corn futures on China's Dalian Commodities Exchange settled lower with the benchmark September contract down RMB8 at RMB1,666 per metric tonne.