May 15, 2007

 

CBOT Corn Outlook on Tuesday: Down 6-8 cents on planting progress pressure

 

 

Corn futures on the Chicago Board of Trade are seen starting Tuesday's day session on weak footing, taking its cue from overnight trade, with better-than-expected planting progress serving as the downside catalyst.

 

Analysts expect corn to open 6 to 8 cents lower.

 

In overnight electronic trading, July corn was 7 1/2 cents lower at US$3.55 3/4, and December corn was 6 1/2 cents lower at US$3.64 1/2.

 

A defensive tone is seen dominating early market action, with the U.S. Department of Agriculture's planting progress report showing farmers aggressively planting corn last week, coupled with favorable weather conditions in store this week, applying pressure, analysts said.

 

"You have to give the first round to market bears, as U.S. corn plantings have caught up, and that should encourage traders to trim risk premium from prices," said Vic Lespinasse, floor analyst with A.G. Edwards and Sons in Chicago.

 

Plantings were right in line with the five-year average and above estimates, said Brian Hoops, president of Midwest Market Solutions in Yankton, S.D.

 

The USDA reported that 78% of the U.S. corn crop was planted as of May 13, below the 83% planted in 2006 but matching the five-year average. Traders and analysts had expected corn planting at 70% to 75% complete.

 

In Iowa, where the western one-third of the state has experienced heavy rains in recent weeks, 77% of the crop has been seeded, behind the 90% sown in 2006 and the five-year average of 87%. Overall, 39% of the crop has emerged, compared to 41% last year and the five-year average of 36%.

 

A market technician said trading in July futures should range between last week's low of US$3.54 and the May high of US$3.96 1/2. The next downside price objective is closing prices below solid support at US$3.54 a bushel. The market would regain some fresh upside technical momentum by pushing prices above US$3.77, which would fill on the upside last week's big downside price gap on the daily bar chart.

 

First resistance for July corn is seen at US$3.67 3/4 and then at Monday's high of US$3.72 1/4. First support is seen at Monday's low of US$3.62 3/4 and then at US$3.61.

 

The DTN Meteorlogix Weather Service forecast said rainfall over Nebraska, parts of Iowa and Missouri may slow planting progress for a few days in the western Midwest before it dries out again. Soil moisture favors early growth, except eastern Minnesota may be turning too dry. In the eastern Midwest, showers Tuesday may cause planting slowdowns but nothing major is expected. Soil moisture will favor early growth at this time, however the region may be trending drier, Meteorlogix reported.

 

Deliveries posted against the May future were 428 contracts. Large issuers included the house account of Goldman Sachs and Co., which issued 182 contracts. Large stoppers included a customer account at Astro Division of UBS Securities LLC, stopping 290 lots, and the house account of ADM Investor Services, which stopped 52 contracts. The last trade assigned was May 14.

 

In other news, China exported 580,000 metric tonnes of corn in April, the General Administration of Customs said Tuesday. Corn exports during the first four months of this year totaled 3.48 million tonnes, up 55% from a year earlier, according to the preliminary data from customs.

 

In overseas markets, corn futures traded on the Dalian Commodity Exchange settled mostly higher. The benchmark September 2007 contract settled RMB5 lower at RMB1,679/tonne.