May 19, 2006

 

CBOT Corn Outlook on Friday: Down 2-3 cents on floor weakness, outside markets

 

 

Corn futures are expected to open 2-3 cents lower Friday on overnight weakness, lower calls for both wheat and soybeans and pressure coming from key outside markets, sources said.

 

In e-cbot trade, July corn fell 2 1/2 cents to US$2.57 3/4 and December corn fell 2 1/2 cents to US$2.82 3/4.

 

Crude oil is lower in electronic trade, the precious metals are down in early activity and the U.S. dollar is higher to sharply higher, all of which are expected to pressure the grain markets, said Don Roose, president of U.S. Commodities in West Des Moines, Iowa.

 

"It feels like the bullish fever has broke on some of these outside markets," he said.

 

Weather conditions are slowly improving over the corn belt, with warmer temperatures on the horizon, which will benefit crop emergence and is seen adding light pressure to the market. The improved weather will also allow farmers in the eastern belt to finish planting.

 

Scattered showers are possible over the corn belt this weekend, however. Mostly dry conditions are expected on Monday, with a chance for showers developing on Tuesday night, DTN Meteorlogix said.

 

Cash corn movement continues to pick up this week as many farmers wrap up spring planting and take advantage of some of the highest cash prices since September 2004. The CBOT reported 1.6 million bushels in net cash corn receipts at surveyed Midwestern elevators, more than double week-earlier levels.

 

Nearby cash basis bids were mostly steady, with a few instances of slightly lower prices. Cedar Rapids, Iowa., Peoria, Ill., and Minneapolis were all 1 cent weaker, while Marshall, Minn., was 2 cents weaker.

 

Archer Daniels Midland Co. President and Chief Executive Officer Patricia Woertz said Thursday that the proposal to eliminate the 54-cents-a-gallon import tax on ethanol would not have much effect on the U.S. market. Imports of ethanol have been so small and there is so little available to export, that elimination of the tariff would likely have little impact in the medium term, she said.

 

U.S. Energy Secretary Samuel Bodman said earlier this month the Bush administration is weighing the possibility of eliminating the ethanol tax in order to ramp up U.S. supplies as the U.S. enters the busy summer driving season.

 

ADM is the leading producer of U.S. ethanol.

 

Meanwhile, corn futures on China's Dalian Commodity Exchange closed mostly higher, though the benchmark March 2007 contract fell RMB5 to RMB1,500 a tonne.

 

South Korea passed on a tender to buy to cargoes of optional-origin corn totaling 110,000 metric tonnes. A re-tender is expected to be issued next week, a trader said.

 

Japan will promote the use of ethanol in vehicles by raising the percentage cap of ethanol in gasoline and providing gasoline service stations with subsidies for new equipment to sell the alternative fuel. Gasoline in Japan can no only contain up to a 3% ethanol additive, but the government plans to raise the limit to 10%.

 

Japan is expected to source much ethanol from Brazil, the world's largest producer, though energy experts doubted whether it can export enough to meet Japan's needs.