October 10, 2007

 

CBOT Corn Outlook on Wednesday: 3-4 cents higher on short covering, spillover

 

 

Chicago Board of Trade corn futures are expected to begin trading 3-to-4 cents higher Wednesday, underpinned by short covering ahead of Friday's U.S. Department of Agriculture reports and spillover from an expected stronger start in both soybeans and wheat, analysts said.

 

In overnight electronic trading, December corn rose 3 1/2 cents to US$3.46 per bushel and March gained 3 cents to US$3.62 1/2. E-CBOT volume in December was 3,726 contracts.

 

Corn should trade to the upside with participants continuing to cover short positions ahead of Friday's USDA production and supply/demand reports, and after recent price weakness, a commission house analyst said.

 

The average production estimate for the 2007-08 crop year was 13.459 billion bushels, according to a survey of 24 analysts by Dow Jones Newswires, 151 million bushels above the 13.308 billion estimated by the USDA in September.

 

The average yield estimate for the 2007-08 crop year was 157.7 bushels per acre, according to 23 analysts surveyed, compared to the 155.8 bushels estimated in Sept. by the USDA.

 

The corn market should also draw support from an expected stronger start in soybean and wheat prices, a trader said. Wheat was higher overnight on the news that Egypt is tendering for wheat. Talk that the government might reduce soybean acreage in Friday's USDA report helped boost prices overnight.

 

Commodity prices in general are strong and the dollar is weak, which should also supply spillover strength to corn, the analyst said.

 

Tuesday's crop progress report is likely to have little impact on market direction, the trader said.

 

The USDA reported that 42% of the U.S. corn crop was harvested as of Oct. 7, in line with analyst expectations and well above the five-year average of 30%. In Illinois, 76% of the crop was harvested, compared to the average of 45%. In Iowa, 22% of the crop has been cut, compared to the average of 16%.

 

On daily open auction technical charts, December corn was supported by short covering following recent weakness but ended near the session low, a market technician said. Sharp losses in wheat futures weighed on corn Tuesday and the low-range close Tuesday suggests more downside potential, the technician said. The next downside price objective for market bears remains closing prices below solid support at US$3.35. The bulls' next upside price objective is to close prices above solid resistance at US$3.50.

First resistance for December corn is seen at US$3.45 and then at US$3.48 1/2, Tuesday's high. First support is seen at US$3.39 1/2, Tuesday's low and then at US$3.35.

 

In other corn news, cash corn prices in China were stable in the week ended Wednesday with traders waiting on new supplies to enter the market near month's end. Traders are hesitant to sell old-crop corn as an expected drop in production will support new crop prices, a trader said.

 

Corn futures on China's Dalian Commodities Exchange settled slightly lower with the May contract down RMB4 at RMB1,660/tonne.