September 12, 2007

 

CBOT Corn Outlook on Wednesday: Down 2-4 cents on record U.S. corn production

 

 

Chicago Board of Trade corn futures are expected to begin day time trading 2-to-4 cents lower Wednesday as a larger-than-expected crop production estimate from the U.S. Department of Agriculture is expected to weigh on prices at the opening, analysts said.

 

In overnight electronic trading before the report, September corn fell 1 3/4 cents to US$3.22 3/4 per bushel, December rose 1/4 cent to US$3.41 1/2 and March gained 1/2 cent to US$3.58 1/4. E-CBOT volume in December was 3,951 contracts.

 

The USDA estimated 2007-08 U.S. corn production at a record 13.308 billion bushels, well above the 13.128 billion average analyst estimate as well as the 13.054 billion estimated in August.

 

The USDA pegged the yield at 155.8 bushels per acre, above the 153.7 average analyst estimate as well as the 152.8 bushel per acre estimated in August and well above the final 2006 yield of 149.1.

 

"The market is called a little lower and I think that's reasonable," said Bill Nelson, associate vice-president at AG Edwards & Sons in St. Louis. "The great yield estimates coming out of the Illinois and Iowa area raise thoughts that the eventual (US corn production) number will be even higher (than the 13.3 billion bushel crop predicted Wednesday)," said Nelson.

 

In Iowa, the largest U.S. corn producing state, the bushel per acre yield was raised by 2 bushels from last month to 182.0 bushels per acre. In Illinois, ranked as the second largest corn producing state, the government raised its yield estimate to 180 bushels per acre, also 2 bushels above last month's forecast.

 

2007-08 ending stocks were estimated at 1.675 billion bushels up 159 million bushels from the 1.516 estimated in August.

 

In the supply and demand report the USDA raised the amount of corn used as feed by 100 million bushels, increased corn exports by 100 million bushels and trimmed corn used for ethanol by 100 million bushels.

 

"Certainly the corn number is a big number (production) and it gives the market a cushion for next year if we don't get the acres we need," said Don Roose, president of U.S. Commodities "Corn should be down but buffered by higher wheat and soybeans."

 

Soybeans are expected to open 5-to-7 cents higher on a supportive crop production estimate and a sharp drop in soybean oil ending stocks. Wheat is called 15-to-20 cents higher as U.S. wheat ending stocks were below analyst estimates and world wheat ending stocks were also reduced, analysts said.

 

On daily technical charts, December corn closed nearer the session low on position squaring ahead of the USDA's production and supply/demand reports Wednesday morning, a technical analyst said.

 

The bulls' next upside price objective remains pushing prices above solid resistance at US$3.50, with the bears' next downside price objective closing prices below solid support at last week's low of US$3.35 1/2.

 

First resistance for December corn is seen at US$3.45 and then at US$3.49 1/4. First support is seen at US$3.38 1/2, Tuesday's low and then at US$3.35 1/2.

 

Deliveries posted against the Chicago Board of Trade September corn future were 1,599 contracts Wednesday. Large issuers included the customer account of Man Professional Clearing which issued 556 contracts and the customer account of MF Global which issued 385 contracts. Large stoppers included the customer account of Man Professional Clearing which stopped 508 contracts, the customer account of MF Global which stopped 403 contracts, and the house account of Tenco which stopped 215 contracts. The last trade assigned was Sept. 11.

 

In other corn news, China is unlikely to continue exporting corn in large amounts due to increasing demand for feed, a government-backed researcher said Wednesday.

 

However, the country will not import corn in large amounts either, as international prices are higher due to ethanol, said Ke Bingdheng, director-general of the Research Center For Rural Economy.

 

Corn futures on China's Dalian Commodities Exchange settled higher, analysts said. The May contract settled RMB/2 higher at RMB1,671 per metric tonne.