June 30, 2009

 

CBOT Corn Outlook on Tuesday: Sharply lower on bearish acreage number

 

 

Chicago Board of Trade corn futures are expected to fall on Tuesday's open following a bearish government report projecting planted acreage much higher than analysts expected.

 

Corn is called 10 to 20 cents lower, with some analysts saying the market potentially could tumble by the exchange-imposed daily trading limit of 30 cents.

 

The U.S. Department of Agriculture projected 2009 planted acres at 87.035 million, up from a March estimate of 84.986 million acres. The projection was much higher than the average trade estimate of 84.158 million; of the 18 analysts surveyed by Dow Jones, the highest estimate was 86 million.

 

"We're planting the second biggest corn crop since 1946. This report is quite bearish," Country Hedging analyst Sterling Smith said. "We do have a monster crop out there."

 

Analysts said the report showed that the USDA underestimated acreage in its March planting intentions report. The trade has for weeks been expecting a loss of corn acreage of 1 million acres or more, although in recent days there has been increased talk about a more modest reduction or even an increase.

 

"Rest of the summer, it means that soybeans are the crop that's at risk, and corn has the safety net," said Arlan Suderman, Farm Futures analyst.

 

Soybean acreage increased less than expected, and Suderman said there could be corn-soybean spreading based on the report.

 

"But then traders will also start to watch the dollar, which is breaking lower this morning and showing signs that the correction is over," Suderman said. That could potentially limit corn's losses, he said.

 

The USDA also said in a separate report that corn stocks totaled 4.266 billion bushels as of June 1. That's higher than the average analyst estimate of 4.190 billion and up from the total of 4.028 billion at the same time last year.

 

Although the planting season got off to a slow start due to very wet weather in the eastern U.S. corn belt, the increased acreage projection comes amid a lengthy period of favorable crop weather weighing on the market. Corn is also under technical pressure, analysts add.

 

Crop ratings continue to improve, which is bearish for the market. The USDA said Monday that 72% of U.S. corn was in good-to-excellent shape as of Sunday, up two percentage points from last week. Traders surveyed by Dow Jones Newswires anticipated one- to two-percentage-point declines in ratings.

 

Traders had expected last week's heat would cause the crop to look more ragged.

 

In overnight trade, July corn was up 4 cents to US$3.81 per bushel, September corn was up 3 1/4 cents to US$3.87 3/4, and December corn was up 2 3/4 cents to US$4.

 

The next upside price objective is to push and close December prices above solid technical resistance at US$4.20 a bushel, a technical analyst said. The next downside price objective for the bears is to push and close prices below strong technical support at US$3.90 a bushel.

 

First resistance for December corn is seen at US$4 and then at Monday's high of US$4.04, the technical analyst said. First support is seen at Monday's low of US$3.95 1/2 and then at US$3.90.