May 30, 2007

 

CBOT Corn Outlook on Wednesday: 1-2 cents higher start; two-sided trade expected

 

 

Chicago Board of Trade corn futures are predicted to start day session trading 1 to 2 cents higher Wednesday, supported by some concerns over longer range forecasts. However, Tuesday's favorable crop progress report and near-term rain in parts of the U.S. Midwest is expected to limit the upside, analysts said.

 

In overnight electronic trading, July corn rose 2 3/4 cents to US$3.67 1/2 per bushel, September gained 2 1/2 cents to US$3.70 1/4 and December rose 2 1/2 cents to US$3.70. E-CBOT volume in July was 3,081 contracts.

 

Corn should begin trading higher supported by some weather forecasts calling for a ridge to develop in early June which could limit rainfall, a floor analyst said. Ideas recent losses were overdone and due for a correction may also provide support, the analyst said.

 

However, Tuesday's crop conditions were better than most traders expected and that could temper any upside enthusiasm, a trader said.

 

The U.S. Department of Agriculture reported that 78% of the U.S. corn crop was in good-to-excellent condition, unchanged from the previous week. Most analysts had expected a decline of 1 to 3 percentage points.

 

Ninety-seven percent of the crop was planted, above the five-year average of 93%. Eighty-five percent of the crop had emerged, compared to the five-year average of 75%.

 

The market could also be influenced by a steep decline in China's equity markets overnight, analysts said. China's stock market fell more than 6% after China announced a plan to tax stock market transactions.

 

In the western U.S. Midwest, periods of scattered showers and thunderstorms with 0.30-1.50 inches are possible through Friday, DTN Meteorologix Weather said. Temperatures are expected to average near-to-below normal west and near-to-above normal east.

 

In the eastern U.S. Midwest, there is a chance for a few light showers through Friday in western areas of the region with eastern areas dry Thursday with only a few light showers expected on Friday, Meteorologix Weather said. Temperatures are expected to average above normal in the period.

 

In the 6- to 10-day outlook, temperatures are expected to average below normal early in the period and above normal late. Rainfall is expected to average near-to-above normal north and near-to-below normal south.

 

On daily technical charts July traded down to a fresh two-week low with the next downside price objective for the bears is closing prices below solid support at US$3.61 per bushel, a technical analyst said. A close above US$3.75 would help the bulls regain upside technical momentum, the analyst added.

 

First resistance for July is seen at US$3.67 1/2, and then at US$3.70. First support is seen at US$3.63 1/4, Tuesday's low and then at US$3.61.

 

In other corn news, strong demand from the domestic ethanol industry is likely to help support corn prices in China until the crop is harvested, analysts said.

 

Cash corn prices imported to Asia are likely to slip following wet weather in the U.S. over the weekend, traders said. Market direction for corn, soybeans and wheat will follow the weather in the U.S. over the next two months, said Thomas Lee Bauer, head of research for Rabobank International in Singapore.

 

Corn futures on China's Dalian Commodities Exchange settled mostly lower with the benchmark September contract down RMB14 at RMB1,650 per metric tonne.