August 11, 2006

  

CBOT Corn Outlook on Friday: Seen 1-3 cents down on USDA production estimate

 

 

Corn futures are predicted to start day time trading 1-3 cents lower Friday after the U.S. Department of Agriculture estimated larger than expected corn production in its August crop production and supply and demand reports.

 

In overnight e-CBOT trading prior to the report, September corn gained 1 1/4 cents to US$2.40 per bushel, and December rose 1 cent to US$2.56 3/4.

 

The USDA estimated 2006-07 corn production at 10.976 billion bushels, well above the average analyst estimate of 10.795 billion and the USDA's July estimate of 10.740 billion.

 

Based on conditions as of Aug. 1, yields are expected to average 152.2 bushels per acre the USDA said, above the average analyst estimate of 149.9 bushels and the July USDA estimate of 149.0.

 

"For corn this is the sixth year out of the last six years USDA has come above the average trade guess in the August report," said Brian Hoops, president of Midwest Marketing Solutions in Yankton, South Dakota. "The production number is a big jump and should weigh on corn. The USDA did increase total usage by 80 million bushels but ending stocks were increased by 155 million," he said.

 

Ending stocks for 2006-07 were increased to 1.232 billion bushels from 1.077 billion bushels, above the average analyst estimate of 1.105 billion, with 2005-06 ending stocks unchanged at 2.062 billion

 

The USDA noted that yields in the western corn belt were at or below 2005's levels as scarce precipitation and above normal temperatures depleted soil moisture while eastern corn belt yields were generally higher than last year as frequent rains throughout much of the growing season helped maintain adequate soil moisture.

 

Although the USDA estimated soybean production below analysts estimates, corn won't follow the soybeans, a commission house analyst said. Corn's report was bearish enough that it should not follow soybeans today, he added.

 

Soybeans are expected to open higher on a supportive USDA production forecast.

 

On technical charts, first resistance for December corn is seen at US$2.57 1/2, Thursday's high and then at US$2.60 1/2. First support is pegged at US$2.55 and then at US$2.53 1/2.

 

Cash corn basis bids were mixed Friday morning. Central Illinois was unchanged cents at 17 cents under the September future.

 

In other corn news, corn futures on China's Dalian Commodities exchange settled higher, with May 2007 down RMB/8 at RMB/1,392/tonne.