July 30, 2007

 

CBOT Corn Outlook on Monday: Seen firmer on weather forecasts

 

 

Forecasts for hot Midwestern weather is expected to support Chicago Board of Trade corn prices Monday, analysts said.

 

Most-active December corn is called to open 1-2 cents a bushel higher.

 

December corn futures were firmer in overnight trade, rising 2 cents to US$3.38 1/2 cents.

 

Private weather firm DTN Meteorologix said the corn belt could see high temperatures in the upper 80s to middle 90s along with little rainfall are forecast during the next five to seven days, which will deplete soil moisture and increase stress on filling corn and soybeans. They said the greatest stress will be in the dry areas of eastern South Dakota and southwest Minnesota, although some timely beneficial rain is possible next week for the western corn belt. The eastern corn belt may see significant rains next week.

 

"We pushed corn down hard back to support. The weather looks threatening for a few days although the long-range forecast does cool things back down. So what we're doing is putting some risk premium back in the market," said Don Roose, president, U.S. Commodities.

 

The weather is most-important for the soybean crop, which is entering its key reproductive stage, when it sets yield. If soybeans rally, it's likely that it will help pull corn higher, analysts said.

 

While the weather is more a factor for soybeans than corn since the corn crop is past its critical pollination stage, hot and dry weather could still pose a problem for the developing plants. "You can hurt corn a bit here, about 5% on yield, but that's not huge," said Roose.

 

A technical analyst said given Friday's firmer close, bulls are in a stronger position, giving them "confidence that a near-term market low is in place. The next downside price objective for the bears is to close prices below solid support at last week's low of US$3.24 1/2. The bulls' next upside price objective is closing prices above solid technical resistance at last week's high of US$3.40 1/2," the analyst said.

 

In Friday's Commodity Futures Trading Commission commitment of traders report, large speculative traders reduced their long CBOT corn futures and options on futures positions by 6,732 contracts and are now net long 89,640 contracts. Large commercial traders increased their short holdings by 2,203 contracts and are now net short 344,967 contracts. Large index funds added 2,433 contracts to their long positions and are now net long 366,664 contracts.

 

In other news, Philippine corn output this year is likely to be lower than previously expected, as a prevailing drought could reduce crop yield, a senior agriculture official told Dow Jones Newswires. The new forecast - in a range of 6.5 million to 6.7 million metric tonnes - is down from the department's original projection of 6.9 million tonnes for 2007. Last year's production totaled 6.08 million tonnes.

 

Argentine corn exports for May totaled 2,153,950 metric tonnes, up 90% from the 1,130,736 tonnes shipped in May 2006, the latest Agriculture Secretariat data show.