August 1, 2006

CBOT Corn Outlook on Tuesday: Flat to 1 cent higher start, choppy trade seen

Corn futures are expected to start trading flat to 1 cent higher Tuesday morning as Monday's decline in crop conditions is expected to be offset by rain falling in the western U.S. Midwest, sources said.

In overnight e-CBOT trading, September corn gained 1 cent to US$2.40 per bushel and December rose 1/2 cent to US$2.56 1/2.

Corn should start out a little higher, deriving some support from the decline in crop conditions in Monday's crop progress report, said Shawn McCambridge, senior grain analyst at Prudential Financial.

Monday afternoon the U.S. Department of Agriculture reported that 56% of the U.S. corn crop was in good-to-excellent condition, three percentage points lower than last week and within expectations of a 1-3 percentage point decline. Conditions in Iowa fell 5 percentage points to 57% in the good-to-excellent category from 62% the previous week and in Illinois 69% of the crop was in good-to-excellent condition, unchanged from the prior week.

The rains moving across the western U.S. corn belt will temper the buying enthusiasm as there is a pretty good weather system moving across Iowa right now and that will keep some people out of the market. The crop needs the rain desperately in those areas, he added.

Activity could be choppy as the near-term rainfall will provide the corn with some relief; however, additional rain is needed in those areas, McCambridge added.

In the western U.S. Midwest, scattered showers and thunderstorms with amounts 0.30-1.50 inches with locally heavier amounts possible are expected over the next 48 hours, DTN Meteorologix Weather said. Mostly dry conditions are forecast in the region from Thursday through Saturday with a few light showers possible on Sunday. Temperatures are expected near to below normal Wednesday, near to above normal Thursday and above normal Friday through Sunday, DTN Meteorologix Weather said.

In the 6-10 day outlook temperatures are expected to be mostly above normal with rainfall mostly below normal.

In the eastern U.S. Midwest, dry conditions with just a few light showers are expected Wednesday with scattered showers and thunderstorms on Thursday with amounts .25-.75 inch and locally heavier. Mostly dry conditions are expected on Friday and Saturday. Temperatures will be above to much above normal in the next 48 hours with highs in the 90's to low 100's Fahrenheit. Near to above normal readings are expected Thursday into Friday.

In the 6-to-10 day outlook temperatures are forecast near to above normal and precipitation near to below normal.

On technical charts, the late July low of US$2.51 is still strong technical support in December corn, but the bear's next near-term downside objective remains the June low of US$2.47 3/4, a technical analyst said. The next upside price objective is closing prices above last week's high of US$2.60 3/4, he added. First resistance is seen at US$2.57, and then at US$2.60 3/4. First support is pegged at US$2.53 3/4 and then at US$2.52.

Cash corn basis bids were mixed Monday morning. Central Illinois was unchanged at 13 cents under the September future.

In other corn news, Malaysian corn imports are expected to be flat in 2006 as slow growth in the poultry industry is likely to limit demand for corn, industry sources said.

In the Philippines, feed millers will continue to increase the use of feed wheat in place of corn as high import duties keep corn at a price disadvantage compared to wheat, Philippine feed industry sources said.

High customs tariffs and a bullish international market for corn is limiting the availability of corn for use by India's poultry industry, a senior industry analyst said Tuesday.

Corn futures on China's Dalian Commodities exchange ended mostly lower, with May 2007 down RMB/3 at RMB 1,418/tonne.