August 24, 2006

 

CBOT Corn Outlook on Thursday: Firmer on exports, follow-through buys

 

 

Corn futures at the Chicago Board of Trade are expected to trade steady to firmer Thursday, supported by export sales data and followthrough buying after Wednesday's positive close and the gains in overnight trade.

 

Most active December is called to open steady to 1 cent a bushel higher.

 

In e-cbot trade, December corn was 1 3/4 cent higher at US$2.41 3/4 a bushel. Volume was light.

 

The U.S. Department of Agriculture said weekly corn export sales were 181,100 metric tonnes for old-crop corn, a marketing year low. A survey of analysts estimated old-crop corn exports at 200,000 to 400,000 tonnes. New-crop corn sales were 1.554 million tonnes, at the top end of analysts' estimates of 900,000 to 1.5 million tonnes.

 

"The sales for corn were really good, but then the market usually trades that for five minutes," said a long-time floor analyst.

 

The U.S. Department of Agriculture announced Thursday in its daily sales reporting data Egypt bought 120,000 tonnes of U.S. new-crop corn.

 

Japan's 2006 corn imports won't fall at all from last year even as China, the world's largest corn exporter, abdicates its role as the region's major supplier, according to a prominent industry executive. Imports are likely to reach 16.6 million-16.7 million metric tonnes, steady from last year's 16.6 million tonnes, with Japan retaining its position as one of the world's largest corn importers, said Nobuyuki Chino, president of Unipac Grains, one of the top Japanese firms involved in grains trade.

 

Crop scouts saw another disappointing day of corn yields on the eastern leg of the John Deere/Pro Farmer Midwest Crop Tour after crossing Illinois. Average yields were estimated at 149.32 bushels per acre. That represents a 16% increase from drought-reduced yields predicted by the tour during the Illinois drought of 2005 and production potential still fell somewhat short of the 20% improvement in year-to-year corn yields currently being forecast by the USDA.

 

Crop tour members observed an average corn crop in the western half of Iowa. Only the western 40% of the state was surveyed as of Wednesday night. Observations from one of the eight routes indicated a yield of 145.9 bushels per acre. The crop tour will fan out across Minnesota on Thursday to survey corn and soybeans before concluding in Owatonna, Minn., where tour officials will issue production estimates for Iowa and Minnesota.

 

On Wednesday, corn rose off of news of disappointing yields in Indiana, and that held true for Illinois, too. That could give the market support, analysts said.

 

"Technically I think the market has turned. Corn doesn't want to go lower. But the weather, even though it's less important, is bearish and unless we get some dramatically bullish news, I don't know how much higher this market can go," the floor-based analyst said.

 

DTN Meteorologix said Midwestern rainfall during the five day period will favor filling crops but may be unfavorable for any maturing crops. There is no significant cold weather in sight.

 

The worst drought to strike parts of China's southwest in 50 years has badly damaged crops and cost more than RMB8.9 billion yuan (USUS$1.1 billion) in economic losses, a news report said Thursday. The China Daily didn't say whether the reported losses included damage to other industries besides farming.

 

Even after Wednesday's short covering rally, a technical analyst said bears are still in technical control. Bears' next near-term downside price objective is a close under the contract low of US$2.33 1/2. The bulls need to push prices above last week's high of US$2.42. First resistance for December corn is seen at US$2.42 and then at US$2.45. First support is seen at US$2.37 1/2 and then at US$2.35 3/4.