September 30, 2008

 

CBOT Corn Outlook on Tuesday: Lower on USDA report; outsides support

 

 

Chicago Board of Trade corn futures are expected to open lower Tuesday, with bearish government stocks projections outweighing overnight gains, traders said.

 

Corn is called 3 to 5 cents lower. Traders said the U.S. Department of Agriculture's fourth-quarter grain stocks report released Tuesday morning was bearish.

 

The government reported fourth-quarter grain stocks of 1.624 billion bushels, above analysts' average estimate of 1.546 billion bushels. Stocks were 1.304 billion bushels last year.

 

Citigroup analyst Terry Reilly said implied wheat for feed during the summer quarter was about 80 million bushels above his estimate, with a corresponding drop in corn feed use.

 

"We fed a lot more wheat than we thought and a lot less corn than we thought," Reilly said. "Obviously the dip in wheat prices had a profound effect on users' choice for feed.

 

Reilly expected both corn and beans to be lower in early trading on the report. But another analyst, Chad Henderson with Prime Ag Consultants, said that with a bounce in the equity markets, "it's hard to believe that's going to be negative on the opening."

 

In overnight trading, December corn was up 8 1/2 cents to US$5.21 1/2 and March corn was up 10 cents to US$5.41.

 

Corn fell limit down Monday, amid broad commodity liquidation as the markets eyed the turmoil in the financial sector. The U.S. House's rejection of a proposed government bailout plan Monday has stoked fears of a severe worldwide recession.

 

The market will remain jittery Tuesday, analysts said, although it could get some support from a rebound in crude oil and the stock market.

 

Despite the bearish USDA report, analysts have said corn fundamentals are only a minor influence on the market right now because of all the outside turmoil. Weather is a bearish factor, some analysts said, as the threat of frost remains minimal.

 

The USDA reported on Monday a surprising increase in the crop's good-to-excellent rating. The USDA reported the good-to-excellent rating at 61%, up from 59% the previous week.

 

Serious near-term chart damage was inflicted Monday as prices saw a downside breakout from a four-week-old sideways trading range on the daily bar chart, a technical analyst said.

 

First resistance for December corn is seen at US$5.25 and then at US$5.35, the technical analyst said. First support is seen at Monday's low of US$5.13 and then at US$5.04 1/2.