November 10, 2005

 

CBOT Corn Outlook on Thursday: Crop estimate grows

  

 

Traders and analysts expect corn futures at the Chicago Board of Trade to open 1 cent to 3 cents a bushel lower Thursday on a U.S. Department of Agriculture report that revealed the second-largest crop on record and larger than some had expected, sources said.

 

The USDA on Thursday estimated the U.S. corn crop in November at 11.032 billion bushels, up from 10.857 billion in October and higher than many trade estimates expecting around 10.965 billion bushels. This was based on an average yield of 148.4 bushels an acre, up from 146.1 bushels in the October report.

 

The USDA nudged up ethanol use by 25 million bushels to 1.575 billion bushels and it raised food, seed and industrial use by 75 million bushels to 2.960 billion.

 

However, the rise in production and exports left unchanged at 2 billion bushels bumped up ending stocks to 2.319 billion bushels, from 2.22 billion in October.

 

"We've got 175 million bushels more production and yet we're not going to export any more of it. That tells me that the exports probably should have been lower, but this is one way of decreasing exports, in my view," said independent agricultural analyst John Kleist.

 

While the USDA increased domestic use, exports were left unchanged, which magnifies the overhang of such a large crop.

 

"Even the ethanol only up 25 million was kind of disappointment. The best category...is food, seed and industrial up 75 million, but when you're looking at a 11-billion-plus crop, we need to do more to price it into consumption," Kleist said.

 

"It's going to remain a burdensome supply, for the near term, anyway," he added.

 

Around the world, the USDA reduced Argentina's corn crop estimate to 17.3 million metric tonnes, from 18 million in October. Brazil's crop estimate was also reduced to 42.5 million tonnes, from 44 million last month.

 

China's corn exports were unchanged at 3 million tonnes.

 

The USDA also issued weekly export sales, which pegged corn at 884,100 tonnes, down 27% from last week and down 8% from the previous four-week average.

 

Meanwhile, mostly dry U.S. Midwest weather through Friday is accelerating harvest progress into its final stages in many areas. Scattered showers and thunderstorms are expected to develop Saturday, bringing 0.10-0.50 inch of rain, private weather forecaster DTN Meteorlogix said. Mostly dry conditions are seen Sunday and Monday.

 

In the eastern belt, mostly dry conditions are expected into Saturday. Scattered light showers are possible late Saturday into Sunday, with dry conditions returning on Monday.

 

In other export news, Taiwan bought 60,000 metric tonnes of U.S. NO. 2 yellow corn from Cargill for shipment either Dec. 17-31 from the U.S. Gulf or Jan. 1-15 from the Pacific Northwest.

 

The Philippines is still seeking 100,000 metric tonnes of corn for December or January shipment.

 

A general outbreak of bird flu in the European Union this winter could cause a 2 million tonne rise in the corn surplus and a 2 million tonne rise in wheat stocks, Strategie Grains said Friday in a monthly report. While bird flue hasn't been detected within the E.U., several cases have been confirmed in nearby countries such as European Russia, Turkey, Croatia and Romania.

 

Technically, December corn finds first resistance at Wednesday's US$1.96 1/4 high, then US$1.98 1/2. First support is seen at the US$1.94 1/4 contract low, then US$1.93, analyst Jim Wyckoff noted.