August 12, 2009

 

CBOT Corn Outlook on Wednesday: Down 3-5 cents on higher crop estimate

 

 

Chicago Board of Trade corn futures are expected to open 3 to 5 cents lower Wednesday following a bearish government crop production report, although traders said losses could be limited by the soybean market.

 

The U.S. Department of Agriculture raised projected 2009 production beyond trade expectations, to 12.761 billion bushels, with a yield of 159.5 bushels per acre. The market was on average expecting production of 12.472 billion bushels with a yield of 157.1 bushels per acre.

 

The USDA's estimates were up from July estimates of 12.290 billion bushels and a yield of 153.4 bushels per acre.

 

Traders have said the crop could approach the national yield record of 160.4 bushels per acre, but they expected the USDA would be conservative in raising the estimate in August. The market was also surprised that the USDA kept its planted acreage estimate at 87 million bushels. On average analysts were expecting a drop of 700,000 acres.

 

"So you have to look at these numbers and say they are somewhat on the negative side for corn," said Jim Hemminger, an analyst for Top Third Ag Marketing. "But the reality is, corn has sold off 50 cents [per bushel] from its highs, so some this is already discounted by the market."

 

The market is oversold in the short term, traders said, which could limit losses. They also noted that the report was bullish for soybeans.

 

"Are we going to trade the corn number or the bean number? That's the question," a trader said.

 

Another trader said that barring any unforeseen weather problems, corn would ultimately set new lows and could drift below US$3.

 

The USDA projected 2009-10 ending stocks at 1.621 billion bushels, up from 1.550 billion last month but below the average trade guess of 1.701 billion. Some questioned what a trader called "rosy" demand expectations, and said the production number would remain the focus.

 

In overnight trade, September corn was down 1 1/4 cents to US$3.25 1/4 per bushel and December corn was down 1 1/4 cents to US$3.99 3/4.

 

The next upside price objective is to push prices above solid technical resistance at US$3.50 a bushel, a technical analyst said. The next downside price objective for the bears is to push and close prices below solid technical support at the contract low of US$3.14 3/4 a bushel.