October 10, 2008

 

CBOT Corn Outlook on Friday: Down 25-30 cents on financial crisis, USDA

 

 

Chicago Board of Trade corn futures are expected to open sharply lower Friday on the worldwide financial crisis and bearish government reports on crop production and ending stocks, analysts said.

 

Corn is called 25 to 30 cents lower. Analysts said the market was already poised to fall sharply following steep overnight gains due to continuing tumult in the financial markets. The government's crop production and supply and demand reports won't help, traders and analysts said.

 

In overnight trading, December corn was down 24 3/4 cents to US$4.13 1/2 and March corn was down 25 3/4 cents to US$4.30.

 

The government pegged the corn crop at 12.2 billion bushels, up from its September estimate of 12.072 billion. Yield is projected at 154 bushels per acre, up from the government's September estimate of 152.3 bushels per acre.

 

The projections exceeded the expectations of analysts, who on average expected a corn crop of 12.076 billion bushels with a yield of 152.3 bushels per acre.

 

The government also increased its ending stocks projection, to 1.154 billion bushels from 1.018 billon bushels in its September report. Analysts estimated ending stocks would be pegged at 1.138 billion bushels.

 

Risk Management Commodities senior analyst Mike Zuzolo said the supply and demand report is more important than production. The supply and demand numbers show that "Wall Street is hitting Main Street, which is hitting the farm gate."

 

"I think the market could take the yield number, but I don't think they'll deal very well with ethanol being reduced on lower gasoline consumption," Zuzolo said. "I think that speaks pretty loudly that the outside markets are beginning to have a pretty negative impact on demand."

 

The government projected ethanol producers will cut their corn consumption by 100 million bushels.

 

The numbers in the reports were only "a little negative," said Price Futures Group Vice President Jack Scoville, but in conjunction with the plunging stock market, he said there would be no reason to buy the market at the open.

 

With equities in the U.S. and elsewhere plunging, traders and analysts said a worldwide recession is likely to take a bite out of commodity demand.

 

Although prices climbed the past two days, a technical analyst said the corn market still remains on a long-term downtrend. The next downside price objective is to push and close December prices below solid technical support at this week's low of US$4.07, the technical analyst said. The next upside price objective is to push and close prices above resistance at US$4.50.

 

DTN Meteorlogix forecast calls for wetter weather later this weekend and early next week, which may lead to harvest delays in western and eastern parts of the U.S. corn belt.