December 9, 2005

 

CBOT Corn Outlook on Friday: 1-2 cents lower on bearish USDA report

 

 

Corn futures at the Chicago Board of Trade are expected to open 1-2 cents lower Friday on a bearishly construed U.S. Department of Agriculture supply/demand report, traders said.

 

In overnight e-CBOT trading before the report was released, December corn rose 1 1/4 cents to us$1.89 1/2 per bushel, March gained 1 1/2 cents to us$2.03 1/4, and May increased 1 1/4 cents to us$2.12 per bushel.

 

Friday morning, the U.S. Department of Agriculture raised its estimate of corn ending stocks to 2.419 billion bushels, up 100 million bushels from its estimate in November, and higher than the average analyst guess of 2.339 billion.

 

The increase was due to a 100-million-bushel reduction in projected U.S. exports, from 2.0 billion bushels to 1.9 billion.

 

In addition, the USDA raised its estimate of Chinese corn production by 4 million metric tonnes to 130.0 million tonnes and increased its exports by 3.0 million metric tonnes to 6.0 million.

 

The reduction in export demand is not a surprise, one floor trader said. However, the increase in Chinese corn production and the increase in their exports is not friendly. The market should test the contract low in March right on the opening, he added. The contract low is us$2.00 1/4.

 

The CBOT reported 1,128 deliveries against the December corn contract Thursday morning. Large issuers included the customer account of the Century Group Division of Man Financial, which issued 220 contracts, and the customer account of LBS Limited Partnership Division of Man Financial, which issued 160 contracts. Large stoppers included the customer account of R.J. O'Brien, which stopped 568 contracts, and the Century Group Division of Man Financial, which stopped 127 contracts.

 

On technical charts, analysts set first resistance for March corn at us$2.02 1/2, Thursday's high and then at us$2.05. First support is pegged at us$2.00 1/4, Thursday's low and the contract low and then at us$2.00.

 

In other corn news, South Korea's Nonghyup Feed Inc. (NOFI) purchased up to 226,000 metric tonnes of corn in a tender concluded Friday, a Seoul-based trader said. China will supply up to 142,000 metric tonnes of the sale, with 55,000 tonnes either from U.S. or South American origin, with the remainder filled from U.S. corn, sources said.

 

Corn futures settled higher at China's Dalian Commodity Exchange on spillover from stronger soybean futures, sources said. The most-active September contract settled RMB9 higher to RMB1,317/tonne.