July 12, 2007

 

CBOT Corn Outlook on Thursday: Called 3-5 cents lower after USDA report

 

 

Chicago Board of Trade corn futures are forecast to start trading 3 to 5 cents lower Thursday after the U.S. Department of Agriculture released a larger-than-expected carry over stocks estimate for both the 2007-08 and 2006-07 crop years, traders said.

 

In overnight electronic trading before the report, July corn fell 3 1/2 cents to US$3.32 1/2 per bushel, September declined 1 cent to US$3.42 and December also fell 1 cent to US$3.54 1/2. E-CBOT volume in December was 6,993 contracts.

 

The USDA estimated the 2007-08 carry over at 1.502 billion bushels above the 1.418 billion bushel average analyst estimate and the 997 million bushels forecast in June.

 

The government estimated the 2006-07 carry over at 1.137 billion bushels, higher than the 1.031 billion estimated in June.

 

"In corn, the lack of any changes in yield puts the focus back on constructive weather outlooks," said Mike Zuzolo, analyst at Risk Management Commodities.

 

A CBOT floor trader agreed and noted that corn has been following soybeans and any strength in soybeans will mitigate weakness in corn futures.

 

The market will continue to focus on the weather with yields still unknown at this point, the trader said.

 

Corn is entering its key reproductive stage of pollination and adverse weather can impact the crop's ability to reproduce which determines its yield.

 

Strong weekly export sales may provide some support, a commission house analyst said. The government reported weekly corn export sales totaled 1.5 million metric tonnes for the week ended July 5, well above analyst estimates. Included in the total were sales of 493,400 metric tonnes for delivery in the 2007-08 crop year.

 

In the western U.S. Midwest, dry weather with only a few light showers are expected Thursday through Saturday, DTN Meteorologix Weather said. Temperatures are expected to average below normal Thursday, near to below normal Friday and near to above normal Saturday.

 

In the eastern U.S. Midwest, dry weather is expected Thursday with only a few light showers favoring eastern areas on Friday and Saturday, Meteorologix said. Temperatures will average below normal Thursday and Friday and near to below normal Saturday.

 

In the 6- to 10-day outlook, temperatures are expected to average near-to-above normal west and near to below normal east. Rainfall is predicted below normal west and near normal east.

 

On daily technical charts, December corn closed nearer the session low Wednesday on position evening ahead of the USDA supply/demand report, though weather forecasts limited the downside, a technical analyst said.

 

The bulls' next upside price objective remains closing prices above solid resistance at US$3.65 per bushel, with the bears' downside price objective closing prices below US$3.36.

 

First resistance is seen at US$3.59 1/4, and then at US$3.65. First support is seen at US$3.50, and then at US$3.45.

 

Deliveries posted against the Chicago Board of Trade July corn future were 555 contracts Thursday. Large issuers included the customer account of Man Financial which issued 324 contracts and the customer account of RJ O'Brien, which issued 228 contracts. Large stoppers included the customer account of Rand Financial, which stopped 252 contracts and the customer account of JP Morgan which stopped 168 contracts. The last trade assigned was July 10.

 

In other corn news, corn futures on China's Dalian Commodities Exchange settled slightly lower with the benchmark January contract down RMB3 at RMB1,496 per metric tonne.