August 22, 2006

 

CBOT Corn Outlook on Tuesday: Steady to firmer following overnight

 

 

Corn futures at the Chicago Board of Trade are expected to trade steady to firmer Tuesday, supported by a slightly firmer overnight trade.

 

Most active December is called to open steady to 1 cent firmer.

 

In e-cbot trade, December corn was 1/4 cent higher at US$2.37 3/4 a bushel. Volume was light.

 

A choppy day of trade is expected, with the market looking for information out of the John Deere/Pro Farmer U.S Midwest crop tour regarding corn yields, analysts said.

 

Crop scouts on the western leg of the crop tour noted corn yields across three of South Dakota's nine cropping districts averaged 95.97 bushels per acre. That is down from the 129.9 bushels per acre found in the state in last year's tour in 31 samples. The U.S. Department of Agriculture's August crop report estimated a yield of 100.0 bushels per acre, down almost 20% decrease from the 2005 yield of 119.0. The three-year tour average from 2003-2005 is 121.67 bushels per acre.

 

Scouts noted eastern South Dakota corn crops were better than expected, while areas west were worse than expected. The group met Monday in Grand Island, Neb. On Tuesday, the western leg will move across eastern Nebraska, ending with an evening wrap-up session Tuesday evening in Nebraska City, Neb.

 

On the eastern leg, random spot checks conducted in 56 fields across the western half of Ohio resulted in an average corn yield estimate of 141.42 bushels per acre, representing an increase of about 15% over the 122.85 bushel yield calculated for the region by tour participants in 2005. The USDA currently predicts an 11.9% increase in Ohio corn yields over 2005.

 

The improved outlook for Ohio's corn harvest resulted from a combination of higher plant populations and increased average ear size. The first day of the tour ended in Anderson, Ind. Monday. The eastern leg of the crop tour will proceed westward Tuesday, with scouts largely evaluating acreage in Indiana, prior to reconvening in Bloomington, Ill. The USDA presently projects a U.S. corn crop of 10.976 billion bushels, down 1.3% from 2005.

 

"Aside from Pro Farmer, there really isn't much going on. The news from there is as expected, although I think people were a little disappointed Ohio crops weren't better," one floor-based analyst said.

 

Fund activity will be watched, too. Funds were largely absent from Monday's session and several analysts cited the lack of significant selling by the funds as a support to the market.

 

Light support is expected from a daily export sale from USDA, which said 179,832 metric tonnes of U.S. corn was sold to Japan for the 2006-07 marketing year. Further, 244,800 tonnes were sold to unknown destinations.

 

In its weekly crop condition report, USDA said 58% of the U.s. corn crop is rated in good to excellent condition, around analysts' expectations. This is a one-percentage-point rise from the previous week's ratings. The crop improved after recent rains. Corn in dough stage advanced to 82% of the crop, up from 67% a week prior, while corn in dent stage is now at 44%, up from 25% previously. Finally, 7% of the crop is mature, about in line with the year-ago and five-year average at 6% mature.

 

DTN Meteorolgix weather firm said the benign weather pattern in the Midwest continues to favor corn development, as rain chances will be mixed with warmer periods during the next 10 days.

 

"The weather is bearish, but for corn it becomes less important as the crop matures," the floor-based analyst said.

 

In export news, China's Xiwang Sugar Holdings Co. (2088.HK) canceled a plan to import 50,000 metric tonnes of genetically modified corn from the U.S. in September, as prices for homegrown corn are expected to fall with the new harvest coming to the market soon, China Feed Industry Association said Tuesday.

 

Taiwan bought 23,000 metric tonnes of U.S. corn and 12,000 tonnes of U.S. soybeans Tuesday. Arrival dates for the entire parcel are Sept. 18-Oct. 2 if shipped from the U.S. Gulf or Oct. 3-17 if shipped from the Pacific Northwest.

 

A severe drought continues to wither China's north while easing in the southwest, the official Xinhua News Agency reported Tuesday. Liaoning province in the northeast and Qinghai in the northwest have suffered substantial economic losses as the drought escalates, while rains have brought some relief in recent days to Chongqing municipality and Sichuan province in the country's southwest, which have witnessed its worst drought in 50 years. Liaoning is a major grain producing region, with acreage totaling 3.12 million hectares this year. Rice and corn acreage stand at 581,900 and 1.89 million hectares, respectively.