June 30, 2008


CBOT Corn Outlook on Monday: Lower on bearish USDA report



Chicago Board of Trade corn futures are seen opening 6 to 8 cents lower Monday on a government report showing higher-than-expected projected planting and corn stocks, analysts said.


The U.S. Department of Agriculture's planted acreage and quarterly gain stocks report will be the main factor in early trading, analysts said.


The USDA pegged corn plantings at 87.327 million acres, above the average pre-report analyst estimate of 85.321 million and the from the March estimate of 86.014 million. The projected planted acreage would be the second highest since 1946.


"The USDA showed acreage data higher than the average trade guess and its shows at these high prices, farmers wanted to keep planting despite rain delays," said Don Roose, president of U.S. Commodities in Des Moines.


"However, the acreage data may not be as bearish as it looks on the surface, as the market will have to factor in what yield potential will be on a lot of these late planted crops."


Analysts said the effects of flood damage across the U.S. Midwest this month was mitigated by the fact that farmers, encouraged by high prices, increased their plantings earlier in the spring. But traders and analysts have questioned the USDA's ability to accurately reflect the full extent of the flood damage.


"You're going to have people questioning that," a trader said. "It doesn't seem like anyone has a handle on it."


Other analysts noted that harvested acreage was projected at 78.940 million acres, which will raise continued production concerns. The supply situation remains very tight, they said.


"There may be some short-term profit taking, but I don't think we're out of the woods yet," a trader said.


Vic Lespinasse, analyst with Grainanalyst.com, said weather could remain a key factor in the market well into October, much later than usual, due to the crop's late planting and troubled spring. In a lot of areas, the crop will need a later-than-usual first freeze.


The market could be supported by strong outside markets Monday, analysts added.


The UDSA pegged corn stocks as of June 1 at 4.028 billion bushels, above the average trade estimate of 3.925 billion. The stocks report shows efforts to ration demand at the current high prices is working, analysts said.


The next upside price objective is to push and close December prices above major psychological resistance at US$8.00, a technical analyst said. The next downside price objective is to push and close prices below solid support at US$7.50.


First resistance for December corn is seen at US$8.00 and then at US$8.05, the technical analyst said. First support is seen at Friday's low of US$7.80 and then at US$7.75.


On Friday, the Commodity Futures Trading Commission reported that speculative funds cut 8,337 contracts from their CBOT corn long positions and added 3,802 contracts to their short positions, putting them net long 186,333 contracts.


The supplemental commitment of traders report also showed that commercial funds cut 49,215 contracts from their long positions and 71,529 from their short positions, putting them net short 517,057 contracts. Index funds cut 12,815 contracts from their long positions and 10,584 from their short positions, putting them net long 428,310 contracts, the CFTC said.

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