November 9, 2006

 

CBOT Corn Outlook on Thursday: Seen 2-5 cents higher after USDA reports

 

 

Chicago Board of Trade corn futures are expected to begin trading 2-to-5 cents higher Thursday, following the release of the crop production and supply and demand reports from the U.S. Department of Agriculture and higher-than-expected U.S. weekly export sales, sources said. In overnight e-CBOT trading, December corn rose 4 1/2 cents to US$3.62 1/4 per bushel and March gained 3 cents to US$3.76 1/2. e-CBOT volume in December was 5,823 contracts.

 

The USDA estimated U.S. corn production at 10.745 billion bushels, below the average analyst estimate of 10.838 billion and October's 10.905 billion bushel estimate.

 

The crop's yield per acre was reduced to 151.2 bushels per acre, below the 153.5 forecast by the USDA last month and the average analyst estimate of 152.5.

 

"The corn production number being cut by one hundred million bushels less than the average trade guess was bullish and that outweighs the USDA trimming back on corn demand," said Bill Nelson, associate vice-president at AG Edwards & Sons in St. Louis.

 

2006-07 ending stocks were trimmed to 935 million bushels from 996 million bushels in October, but above the average trade guess of 912 million bushels.

 

In the supply-demand table, USDA trimmed feed usage by 50 million bushels and cut its estimate of corn exports by 50 million bushels.

 

China's 2006-07 corn production was increased by 2 million metric tonnes to 143.0 million tonnes, however the USDA left China's corn export estimate unchanged at 4 million metric tonnes.

 

The Agriculture Department noted that yield forecasts were lower across much of the central Corn Belt as producers reported actual harvest yields were not as good as earlier expected due to lower grain weight per ear. Compared to last year, yields are higher in all Corn Belt states, except Iowa and Minnesota.

 

"What's important is you have to think in terms of (investment) money moving around the marketplace," said John Roach of Roach Ag Marketing. All the money has been moving toward hard assets for some years now, he said. Up until 2 months ago corn was US$2 a bushel, it was cheap. Now food is the new market play, he added.

 

The reduction in production was pretty much expected, a local corn trader noted. However, corn export sales were much higher than expected and should provide support as it indicates that there has been no price rationing of demand despite the high price of corn, he said.

 

USDA reported weekly U.S. corn export sales were 1.929 million metric tonnes for the week ended Nov. 2, well above the 800,000-1.2 million metric tonnes expected by analysts. Corn sales were 88% above the previous week's total and well above the prior four-week average, the USDA reported. Major buyers included Japan, Mexico, and South Korea.

 

On day session open auction technical charts, December corn gapped open higher and hit a fresh contract high as funds stepped up to buy Wednesday, a market technician said. The next upside price objective for bulls is closing prices above technical resistance at the contract high of US$3.67, the technician said. The bear's next near-term downside price objective is closing prices below solid support at US$3.34, filling on the downside a big upside price gap on the daily bar chart.

 

First resistance for December corn is seen at the contract high of US$3.67 and then at US$3.70. First support is seen at US$3.52 1/2, the bottom of Wednesday's upside price gap and then at US$3.50.

 

Cash corn basis bids were mixed Thursday. Central Illinois was unchanged at 13 cents over the December future.

 

In other corn news, Taiwan Sugar Corp. bought 35,000 metric tonnes of U.S. origin corn from trading firm Marubeni in a tender concluded Thursday, a Taipei-based trader said.

 

Corn futures at China's Dalian Commodities Exchange settled mostly lower as supplies remain strong with the new harvest entering the market, a Chinese analyst said. The May contract fell RMB/2 to RMB 1,520/tonne.