February 9, 2007

 

CBOT Corn Outlook on Friday: Up; e-CBOT, tech strength, neutral USDA

 

 

Chicago Board of Trade corn futures are seen starting Friday's day session on firm footing, supported by higher overnight price themes and technical strength, as the U.S. Department of Agriculture's report failed to provide any surprises.

 

Analysts expect corn to open 2 to 3 cents higher.

 

The strength of overnight prices and technicals should lead corn higher, with the USDA's report seen as neutral to the market, said Shawn McCambridge, senior grains analyst with Prudential Financial in Chicago.

 

The world balance sheet is a bit bearish, with increased South American production and a higher world carryout making it tough for the U.S. to sustain its export program over the course of the year with increased competition from South America amid the high price of corn, he added.

 

The USDA said in the report, U.S. exports were unchanged from January despite stronger competition from South American supplies as Mexico increases imports.

 

The USDA estimated ending stocks at 752 million bushels, unchanged from January. The average of analysts estimates were 762 million bushels. The world carryout was raised 1.51 million metric tonnes to 87.95 million, with Argentine production raised 2 million metric tonnes to 21 million and Brazil production increased by 4 million metric tonnes to 46 million.

 

The lack of changes in the U.S. balance does reaffirm the longer term bullish underlying theme in the market, but without fresh fundamental support for market bulls to digest, any sign of price weakness could uncover selling interest, traders said. However, after a recent price correction futures are poised to return to its trading range of the past month, traders added.

 

A technical analyst said recent price action has formed a downtrend channel on the daily bar chart. But the corn bulls still have the overall near-term technical advantage. The bulls would gain fresh upside technical momentum by producing a close above chart resistance at US$4.05 basis March futures. The next downside price objective is producing a close below solid chart support at this week's low of US$3.91 1/2.

 

First resistance for March corn is seen at Thursday's high of US$4.01 and then at US$4.05. First support is seen at US$3.95 and then at Thursday's low of US$3.92 3/4.

 

USDA announced Friday private exporters reported the sale of 140,208 metric tonnes of U.S. corn for delivery to Japan in the 2006-07 marketing year.

 

U.S. Midwest cash corn basis bids were mostly steady Friday, cash traders said. Spot U.S. cash corn bids were up 3 cents in Cedar Rapids, Iowa, up 7 1/2 cents in Peoria, Ill., and up 2 cents in Evansville, Ind.

 

The DTN Meteorlogix weather forecast said the U.S. and European models are in fair to good agreement during the next 7 days, fair agreement during days 8-10. There continue to be signs pointing towards a more active southern branch jet stream, however the northern branch jet looks to continue fairly strong as well. This means the cold weather pattern for the Midwest and northeast should continue.

 

In Argentina, showers have developed in some areas overnight. Additional showers are possible Friday, with more light activity Monday. The long range outlook shows more rain chances, Meteorlogix reports.

 

In other news, Mexico's Economy Ministry has raised the 2007 quota for duty-free corn imports from any country by 550,000 metric tonnes to a total 1.3 million tonnes, the ministry said in a report Thursday. This is the second time in less than a month that the ministry raised the emergency corn import quota, originally set at 650,000 tonnes on Jan. 12, the report said, a copy of which was obtained by Dow Jones Newswires.

 

In overseas markets, corn futures traded on China's Dalian Commodity Exchange settled higher. The September corn contract rose RMB4 to RMB1,713/tonne.