August 18, 2006

 

CBOT Corn Outlook on Friday: Flat start seen; lacking fresh inputs

 

 

Corn futures are predicted to start day session trading steady Friday, following the tone established in overnight activity and in the absence of fresh news, sources said.

 

In overnight e-CBOT trading, September corn ended unchanged at US$2.19 cents per bushel and December also finished unchanged at US$2.35 1/2. Volume in December on e-CBOT overnight was 4,208 contracts.

 

The market should begin trade steady on the lack of fresh news, said Dale Gustafson, senior analyst with Citigroup Global Markets Inc. The weather looks favorable for wrapping up development of the crop in the U.S. Midwest and there's nothing new to trade off of, he said.

 

Corn is flirting with the low end of the trading range however, and trading could be choppy, Gustafson said. "Our opinion was that the lows would be in the low US$2.30's range and the market is awfully close to that," he said.

 

Scattered showers and thundershowers are forecast in both the western and eastern U.S. Midwest for Friday and Saturday, with temperatures near to below normal west and near to above normal in the eastern U.S. Midwest, DTN Meteorologix Weather said.

 

The 6-to-10 day forecast for the western U.S. Midwest calls for temperatures near normal and rainfall near to above normal.

 

In the eastern U.S. Midwest, the 6-to-10 day outlook expects temperatures near to above normal and rainfall near to above normal, said Meteorologix.

 

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

 

On technical charts, December's open auction price action Thursday could have seen the beginning of a downside "breakout" from a bear flag on the daily bar chart, a technical analyst said. The bears next near-term price objective is closing prices below solid support at US$2.25, while the next major upside price objective for the bulls is filling the Aug. 11 downside price gap on the daily charts, he added. First resistance for December corn is seen at US$2.39 1/4, Thursday's high and then at US$2.42. First support is noted at Thursday' contract low of US$2.34 and then at US$2.32.

 

In other corn news, rapid expansion of China's corn processing industry could led to overcapacity, a government official said in a report on China's National Grain and Oils Information Center web site.

 

According to the CNGOIC, corn consumption by industrial enterprises in China will reach 30 million metric tonnes this year but China's corn processing capacity will reach 50 million tonnes by the end of 2005 and is expected to rise to 70 million tonnes in 2006.

 

A drought in parts of China's corn producing regions will reduce corn production by 10%-15% in Chongqing and Sichuan this fall according to investigations by local corn processing enterprises, said an analyst with the CNGOIC.

 

China's corn production is currently estimated at 138 million metric tonnes by the U.S. Department of Agriculture.

 

Philippine corn production is expected to increase 4% in 2007 to 6.24 million metric tonnes the Philippine Department of Agriculture said Friday.

 

Corn futures on China's Dalian Commodities exchange settled higher with May 2007 up RMB/17 at RMB/1,422/tonne.