February 17, 2006

 

CBOT Corn Outlook on Friday: Seen steady; looking for directive inputs

  

 

Corn futures on the Chicago Board of Trade are seen opening Friday's open auction session mostly steady, following overnight action amid the absence of fresh directive influences in the market.

 

In overnight electronic trading, March corn was unchanged at US$2.23 1/2, and May corn was unchanged at US$2.34 1/4 per bushel.

 

Futures are poised to take the lead of other markets once again, but analysts say friendly 2006-07 supply and demand projections from the U.S. Department of Agriculture's outlook forum may provide underlying support.

 

USDA on Friday forecast 2006-07 U.S. corn plantings would drop 1.3 million acres from 2005 seedings to total 80.5 million acres. Trend-based 2006 U.S. corn yields are projected at 147.7 bushels per acre, slightly lagging actual 2005 yields of 147.9 bushels per acre. Harvested acreage was put at 73.2 million acres, putting U.S. 2006-07 corn production at 10.810 billion bushels.

 

2006-07 corn ending stocks were seen at 1.726 billion bushels, with total U.S. 2006-07 corn used for feed and residual seen at 5.950 billion bushels while corn used for ethanol fuel was put at 2.150 billion bushels. U.S. 2006-07 corn exports were seen at 2.0 billion bushels, up from the latest 2005-06 U.S. corn export sales of 1.850 billion bushels.

 

Outside markets are positive in early action, with higher gold, silver and crude oil futures potentially generating some upside potential. Traders are expected to watch fund related activity, with spillover momentum from the neighboring wheat and soybean markets watched closely for indications of direction.

 

Trade positioning ahead of the extended holiday weekend looks to be a featured attraction. CBOT markets will be closed Monday in observance of the Presidents Day holiday.

 

Otherwise, the liquidation and rolling of March positions as well as positioning ahead of Friday's expiration of options on March futures remain focal points in the market.

 

Market technicians said last week's high of US$2.36 3/4 remains solid overhead technical resistance for May corn, but a close above that level would open the door to a challenge of solid resistance at the US$2.50 price level. A close below US$2.25 would provide fresh downside technical momentum.

 

First resistance for May corn is seen at US$2.35--Thursday's high--and then at US$2.36 3/4. First support is seen at US$2.31 1/2--Thursday's low--and then at US$2.31.

 

Cash corn basis bids were mostly unchanged across the Midwest.

 

DTN Meteorlogix Weather Service said very hot and mainly dry weather will increase stress to crops during at least the next 5 days in Argentina. Today's long range charts continue to suggest a better chance for thunderstorms later next week. This will be an important system, since the heat wave in the short range will rapidly deplete soil moisture for crops.

 

In demand news, Seoul-based Korea Corn Processing Industry Association, or Kocopia, bought up to 101,000 metric tonnes of optional-origin corn from trading houses Bunge and ADM in a tender concluded Friday, a South Korean trader said.

 

Taiwan Sugar Corp. will seek two combined cargoes totaling 53,000 metric tonnes of U.S. No. 2 yellow corn and U.S. No. 2 yellow soybeans in a tender Wednesday, and Taiwan's Great Wall Enterprise Co. bought 60,000 metric tonnes of U.S. No. 2 yellow corn from trading house Cargill in a tender concluded late Thursday, a Taipei-based trader said Friday.

 

In overseas markets, corn futures China's Dalian Commodity Exchange settled slightly higher, with the benchmark September 2006 contract up RMB5 to RMB1,486/tonne, after trading between RMB1,477/tonne and RMB1,493/tonne.