June 10, 2008

 

CBOT Corn Outlook on Tuesday: Higher on supply and demand report

 

 

Chicago Board of Trade corn futures are expected to open 3 to 5 cents higher Tuesday following the government's supply and demand report, which reduced projected yields and ending corn stocks for 2008-09.

 

In overnight trading, July corn was up 2 3/4 cents to US$6.60 per bushel, September corn was up 1/2 cent to US$6.71, and December was up 2 1/2 to US$6.87 3/4.

 

The supply and demand report from the U.S. Department of Agriculture affirmed traders' concerns that a wet spring and recent heavy rains would hamper crop production.

 

"This month's reduction reflects slow planting progress, slow crop emergence and persistent, heavy rainfall across the Corn Belt," the USDA said. "The latest rounds of torrential rainfall are expected to reduce plant populations and nitrogen available, particularly for corn planted after mid-May."

 

The demand report projected ending corn stocks would increase by 50 million bushels in 2007-08 to 1.433 billion due to lower exports. The trade had estimated 1.424 billion bushels.

 

The projected 2008-09 ending stocks would drop, however, due a yield reduction to 148.9 bushels per acre from 153.9 bushels per acre. Ending stocks are projected at 673 million bushels, down from last month's estimate of 763 million bushels and lower than analysts' estimates of 736 million bushels.

 

Jerry Gidel, an analyst for North American Risk Management Services, said corn prices would likely rise on the report, although the drop in yields was not unexpected, he said.

 

"At this point, 149 bushels per acre is a more realistic type of yield for corn," he said.

 

Analysts said that in addition to the yield reduction, the U.S. could plant fewer corn acres than projected due to the recent heavy rains that have flooded some fields. They said that many farmers will decide its too late to replant corn.

 

"The balance sheet projects production well below usage and output could slip lower if there is a cut in acres when the USDA releases its acreage report June 30," said Brian Hoops, president of Midwest Market Solutions. "The market will have to move into a rationing phase to adjust to the tighter balance sheet."

 

Overseas, Mark E. Keenum, U.S. undersecretary of agriculture, told the International Grain Conference in London Tuesday that corn production could be reduced because "the U.S. is experiencing severe weather problems."

 

The next upside price objective is to push and close July corn prices above solid technical resistance at Monday's contract high of US$6.73, a technical analyst said. The next downside price objective is to push and close prices below solid support at US$6.40.

 

First resistance for July corn is seen at US$6.63 1/4 and then at US$6.73, the analyst said. First support is seen at Monday's low of US$6.50 and then at US$6.40.