August 25, 2009

 

CBOT Corn Outlook Tuesday: Down slightly; crop conditions weigh

 

 

Chicago Board of Trade corn futures are expected to open slightly lower Tuesday amid a lack of supportive news and pressure from an unexpected improvement in crop ratings.

 

Corn is called 1 to 2 cents lower. In overnight trade, September corn was down 1 cent to UA$3.28 1/2 per bushel and December corn was down 1 1/4 cents to UA$3.34 1/4.

 

Monday's crop progress report from the U.S. Department of Agriculture was considered slightly bearish, as the government said that 70% of the corn crop was rated good-to-excellent as of Sunday, up from 68% the prior week.

 

Typically at this time of year the rating drops, and analysts expected a lower rating Monday.

 

Weather remains benign, traders and analysts say, although some say there is still reason to keep a weather premium in the market for now. The crop is considered vulnerable to an early frost as it is behind schedule, with 57% of the crop was in the dough stage, up from 40% last week but behind the average of 79%.

 

Also, just 18% of the crop was dented, up from 9% last week but far behind the average of 43%. In Illinois, only 12% of the crop was denting, compared to the average of 58%.

 

"The billion dollar question is when will the first killing freeze arrive in the Corn Belt?" Western Milling analyst Joel Karlin said in a newsletter.

 

The market has been on an uptrend the past week, although the long-term trend is still lower. Barclays Capital said in a report Monday that Friday's higher close left a bullish pattern on the technical chart, and that in the December contract "further gains are likely to UA$3.42."

 

"For renewed bullish vigor, we prefer to see a close or two above 3.42 to confirm a more meaningful base and raise our sights to the 3.75/4.00 area," Barclays said.

 

The market will continue to be led by soybeans, which has surged on strong demand and tight supplies, traders said.

 

In export news, South Korea's Nonghyup Feed Inc. is seeking 110,000 metric tonnes of corn for March delivery in a tender to be concluded at 0800 GMT, a trader with the company said Tuesday.

 

The tender is split into two cargoes, each of 55,000 tonnes, he said.

 

In other international news, China's government sold 62% of the corn it planned to sell Tuesday, the highest volume sold since this series of weekly auctions started in late July to ease price and supply pressures related to drought.

 

The government sold 1.57 million metric tonnes of corn from its reserves, out of the 2.52 million tonnes it offered to sell, a statement published on the China National Grain & Oil Trade Center's Web site said.

 

"The market now expects higher corn prices due to the drought development (in the major corn producing areas of the northeast)," said an analyst with Chicorn Network.