August 3, 2006

 

CBOT Corn Outlook on Thursday: Seen 1/2-1 cent lower on rain, yield east

 

 

Corn futures are expected to begin the day session trading 1/2 to 1 cent lower Thursday following a lower tone overnight and a larger than expected production estimate from a private analytical firm Wednesday afternoon.

 

However, a forecast expecting a return to drier weather and above normal temperatures next week, good weekly export sales and continued uncertainty over production and yields should provide underlying support, sources said.

 

In overnight e-CBOT trading, September corn fell 1 1/4 cents at US$2.46 per bushel and December finished 1 1/2 cents lower at US$2.62 3/4. Volume in December on e-CBOT overnight was 6,086 contracts.

 

Corn should start out on a lower note but should be well supported by weather concerns for next week and the good weekly export sales report, a commission house analyst said.

 

It appears that the current downside is limited ahead of the production report next week plus it looks like Central Iowa missed the rain and parts of Central Illinois haven't seen much moisture overnight as well, he added.

 

Forecasts for later this weekend and into next week suggest that hot weather will return to the U.S. Midwest as a ridge rebuilds in the region, prompting another round of above normal temperatures and below normal moisture, DTN Meteorologix Weather said.

 

In the western U.S. Midwest, dry conditions are expected from Friday into Wednesday with only a few light showers possible later in the period. Temperatures for much of the period will be above normal with highs in the upper 80's to low 90's degrees Fahrenheit.

 

In the eastern U.S. Midwest, dry conditions are forecast for much of the region from the weekend into the middle of next week with only a few light showers possible on Monday, DTN Meteorologix Weather said. Temperatures are expected to be near to above normal with highs in the middle 80's F to low 90's F.

 

The U.S. Department of Agriculture reported that weekly export sales for the period ending July 27 were 1,602.1 million metric tonnes, well above the 900,000-1.2 million expected. Included in this total were sales of 700,000 for delivery in the 2006-07 crop year.

 

Wednesday's production and yield estimates from FC Stone were larger than expected, but there are still concerns about yields, a floor trader said.

 

FC Stone forecast 2006-07 corn production at 10.887 billion bushels with a yield of 151.0 bushels per acre.

 

On technical charts, bulls regained some upside momentum Wednesday with December closing at its highest level in 2 1/2 weeks, a technical analyst said. The next upside price objective for market bulls is closing above resistance at US$2.68. First resistance is seen at US$2.65 1/2 and then at US$2.68. First support is noted at US$2.62 and then at US$2.60.

 

Cash corn basis bids were unchanged to mostly lower Thursday morning. Central Illinois was down 1 cent at 14 cents under the September future.

 

In other corn news, Taiwan's Major Feed Industries Group, of MFIG, purchased 48,000 metric tonnes of U.S.-origin feed corn in a tender concluded Thursday, a Taipei-based trader said.

 

The U.S. will continue to export corn to Asia in the coming years even with the growth in ethanol demand as increased U.S. production partly through additional use of GMO seeds will help meet demand, a U.S. Grains Council representative said in Asia Thursday.

 

Corn futures on China's Dalian Commodities exchange declined Thursday on ideas of increased domestic corn output, sources said, with May 2007 down RMB/10 at RMB/1,403/tonne.