July 11, 2008


CBOT Corn Outlook on Friday: Up 5-7 cents on report, outside markets



Chicago Board of Trade corn futures are expected to open 5 to 7 cents higher Friday following the U.S. Department of Agriculture's supply and demand report, which analysts said included a bullish reduction in projected yield.


Although ending stocks were above previous estimates and analysts' expectations, analysts were surprised by the yield reduction and said the report would not get in the way of upside support from outside markets.


The report estimated 2007-08 marketing year ending stocks of 1.598 billion bushels, up from the government's June estimate of 1.433 billion bushels and higher than analysts' estimate of 1.514 billion bushels. The 2008-09 ending stocks were projected at 833 million bushels, up from the June estimate of 673 million bushels and analysts' estimates of 820 million bushels.


"I think it's a report that market bulls should be delighted with," said Arlan Suderman, analyst with Farm Futures. "Old crop corn stocks came in much higher than expected, but we showed we need those bushels in the new crop."


He added that a projected reduction in yield, to 148.4 bushels per acre from 148.9 bushels per acre, should "keep the bears at bay." Production was lowered, to 11.715 billion bushels from the June estimate of 11.735 billion bushels.


Mike Zuzolo, senior analyst with Risk Management Commodities, said "corn demand stays firm, with an ethanol cut being offset by feed increase."


Demand for ethanol was lowered by 50 million bushels, to 2.95 billion bushels for 2007-08 and 3.95 billion for 2008-09. Feed and residual use was increased 50 million bushels for 2008-09, to 5.200 billion bushels.


Analysts said prices gained overnight on stronger crude oil. Crude had rallied late in Thursday's trading, with other markets closing before they had time to react.


In overnight trading, July corn was up 6 1/4 cents to US$6.81 1/2 per bushel, September corn was up 7 1/4 cents to US$6.93 3/4 and December corn was up 7 3/4 cents to US$7.12.


But benign weather has prompted losses all week for corn, and the pattern remains bearish, analysts said.


DTN Meteorlogix said the weather forecast is generally favorable for the developing crop. The forecast calls for scattered showers and thunderstorms through Sunday, and mostly dry conditions across the U.S. corn belt Monday and Tuesday.


Prices have fallen from last week's close of US$7.77 for December corn.


"Technically, this week's break did some damage," an analyst said. "It hasn't sealed the door yet, but things are now tilted against seeing a new high."


The next upside price objective is to push December prices above solid technical resistance at US$7.47, which would fill on the upside a downside price gap on the daily chart, a technical analyst said. The next downside price objective is to push and close prices below major psychological support at US$7.00.


First resistance for December corn is seen at Thursday's high of US$7.15 and then at US$7.25 3/4. First support is seen at US$7.00 and then at US$6.90.


There were 560 deliveries reported against July futures Friday morning.

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