August 8, 2007

 

CBOT Corn Outlook on Wednesday: Up 1-2 cents on position squaring, follow through

 

 

Chicago Board of Trade corn futures are predicted to start day session activity 1 to 2 cents higher Wednesday as position squaring and follow through buying from Tuesday's gains are expected to support prices at the opening, analysts said.

 

In overnight electronic trading September corn gained 1 1/2 cents to US$3.36 3/4 per bushel, and December also rose 1 1/2 cents to US$3.53 1/2. E-CBOT volume in December was 15,708 contracts.

 

The market should gain some support from position squaring ahead of the U.S. Department of Agriculture's crop production report on Friday, a commission house analyst said.

 

The average production estimate for the 2007-08 crop year was 12.909 billion bushels, according to an average of 23 analysts, 69 million bushels above the 12.840 billion estimated by the U.S. Department of Agriculture in July.

 

The average yield estimate for the 2007-08 crop year was 151.2 bushels per acre, according to a survey of 23 analysts, compared the 150.3 bushels estimated in July by the USDA.

 

The market will start to the upside based on short-covering but the upside could be limited as the weather is a mixed, split between good rains in the north and hot and dry weather in the south, a trader said.

 

In addition, the technical pattern has turned positive for corn and end-user demand for feedgrains is picking up, the trader said.

 

In the western U.S. Midwest, showers and thunderstorms with amounts of 0.50-2.00 inches and locally heavier are forecast for eastern Nebraska, most of Iowa and northern Missouri Wednesday, DTN Meteorologix Weather said. Mainly dry weather is predicted for Thursday with only a few thundershowers in the northwest on Friday. Temperatures are expected to average near-above-normal Wednesday and Thursday and above normal Friday.

 

In the eastern U.S. Midwest, there is a chance for scattered showers and thunderstorms with amounts of 0.30-1.50 inches in northern areas Wednesday through Thursday, Meteorologix said. Southern areas may see a few showers mainly on Thursday. Temperatures are forecasts to average well above normal through Thursday and near-to-above normal Friday. In southern sections highs between 97-102 degrees are expected through Thursday before cooling off a few degrees on Friday.

 

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

 

On daily technical charts, December corn traded to a three-week high and closed solidly higher, a market technician said. Market bulls gained fresh upside technical momentum Tuesday as a steep seven-week-old downtrend on the daily bar chart was negated, the technician said.

 

The bulls' next upside price objective remains closing prices above solid resistance at US$3.60 per bushel, which would fill on the upside a downside price gap. The bears' next downside price objective is closing prices below US$3.36.

 

First resistance is seen at US$3.52 1/2, Tuesday's high and then at US$3.56. First support is seen at US$3.50, and then at US$3.45.

 

In other corn news, China will not import corn next year, but its exports will likely decline by 70% in 2007-08, a Chinese government think tank said Wednesday. China's next corn exports are likely to be 1.5 million metric tonnes, 3.48 million tonnes lower than its net corn export forecast for 2006-07, according to a report from the country's National Grain and Oils Information Center.

 

A drought in parts of China is unlikely to impact the country's corn output much as "better growing conditions in other areas of the country can make up for the reduced production in drought-hit areas," the National Grain and Oils Information Center said Wednesday.

 

Corn futures on China's Dalian Commodities Exchange settled lower with the benchmark January contract down RMB8 at RMB1,535 per metric tonne.