July 11, 2006

 

CBOT Corn Outlook on Tuesday: 5-7 cents higher on weather, crop conditions

 

 

Chicago Board of Trade corn futures are expected to start pit style trading 5-7 cents higher Tuesday on supportive overnight weather forecasts and weaker-than-expected crop conditions in Monday's crop progress report, sources said.

 

In overnight e-CBOT trading, July corn gained 6 1/2 cents to US$2.54 1/4 and December corn rose 7 1/4 cents to US$2.79 3/4.

 

Corn should be supported by the decline in crop conditions and the overnight weather forecasts, a commission house analyst said.

 

U.S. Department of Agriculture reported Monday afternoon that 63% of the U.S. corn crop was in good-to-excellent condition, down from the 68% reported last week. Traders and analysts had expected a decline in the range of one-three percentage points.

 

Conditions in Iowa declined nine percentage points in the good-to-excellent category, to 68% from 77%. In Illinois, 63% of the crop was rated in good-to-excellent condition, down from 70% the previous week. Iowa and Illinois are the top two U.S. corn producing states.

 

In the western U.S. Midwest, hotter and drier weather will cover the area later this week and through at least the early part of next week, DTN Meteorologix Weather said. Temperatures should average near to above normal with mainly dry conditions on Friday and Saturday.

 

In the 6-to-10-day outlook, temperatures are expected to average above to well above normal and precipitation mostly below normal.

 

In the eastern U.S. Midwest, scattered showers and thunderstorms are possible over the next several days, with mainly dry or only a few light showers on Friday and Saturday, DTN Meteorologix Weather said. Temperatures are expected to average near to above normal over the weekend.

 

In the 6-to-10-day outlook, temperatures are expected to average above normal and rainfall near to below normal, DTN Meteorologix Weather said.

 

Deliveries posted against the July contract Tuesday totaled 1,950 contracts. The customer account of Man Financial issued 576 contracts and stopped 645 contracts and the customer account of Dowd Wescott issued 334 contracts and stopped 409 contracts. Preliminary open interest in July is 6,021 contracts as of Monday, July 10.

 

On technical charts, market bulls are gaining more upside technical momentum, a technical analyst said, with the next upside price objective in December is closing prices above solid chart resistance at US$2.77. First resistance for December corn is seen at US$2.75 and then at US$2.77. First support is pegged at US$2.70, Monday's low and then at US$2.68.

 

In other corn news, corn futures on China's Dalian Commodities exchange settled modestly higher, with the March up RMB4 at RMB1,434/tonne.

 

Declines in corn and wheat futures left performance in the Goldman Sachs Commodities agriculture sub index "modestly negative" in June, analysts at Goldman Sachs said in a report issued Monday. Favorable growing weather in the U.S. corn belt weighed on corn returns for much of the month, which kept corn in good condition, Goldman Sachs said.

 

On Wednesday, the USDA is scheduled to release the July supply and demand report at 7:30 a.m. CDT (1230 GMT).