July 23, 2009

 

CBOT Corn Outlook on Thursday: Up 6-8 cents on USDA plan to review acreage

 

 

Chicago Board of Trade corn futures are expected to open higher Thursday in reaction to news of a corn acreage resurvey.

 

Corn is called 6 to 8 cents higher. In overnight trade, September corn was up 8 1/2 cents at US$3.16 1/2 a bushel and the December contract was up 8 cents at US$3.27 1/4.

 

The U.S. Department of Agriculture announced late Wednesday that "variable weather conditions in key crop-growing regions" mean the department needs to update its acreage report, released June 30. In that report, the USDA estimated farmers would plant 87.035 million acres of corn in the U.S. this year.

 

"In other words, 'Houston, we have a problem,'" analyst Dennis Gartman wrote on the acreage changes in a market commentary.

 

"Market sentiment favors a reduction in both planted and harvested acreage figures," said Shawn McCambridge, senior grains analyst at Prudential-Bache. "It's a reflection that the trade felt the numbers weren't quite accurate at the end of June, and this kind of verifies that idea." He added that while acreage could decrease, the yield number could increase.

 

The market has built in bearishness early in the season, said Arlan Suderman, Farm Futures market analyst. "When you build this much bearishness in this early, it tends to put in an early low," he said. Still, he adds "we're not going to run out of corn this year, and there's no bullish reason to sustain a rally."

 

Suderman said the "pretty good" weekly corn export sales released Thursday by the USDA will also add some support to the market. For corn, net sales of 757,600 metric tonnes were up 8% from last week, though still down 4% from the prior four-week average.

 

Both Suderman and McCambridge said they expect consolidation Thursday and some short covering off oversold conditions. Suderman added that end users will likely "extend some coverage" Thursday.

 

"It's a fundamental change in a market that doesn't have a lot going on fundamentally," McCambridge said of the USDA acreage readjustment. "But with weather conditions ideal, high yields projected and limited support from the news," he said strength may not last.

 

Cool Midwest temperatures have been favorable for the pollinating crop, and rainfall has been adequate in most areas, said DTN Meteorlogix. However, concerns of dryness in Minnesota, northern Indiana and northwest Iowa are arising, though limited due to the cooler temperatures.

 

First resistance for December corn is seen at Wednesday's high of US$3.23 1/2 and then at US$3.25. First support is seen at Wednesday's contract low of US$3.14 3/4 and then at US$3.10.