October 28, 2008


CBOT Corn Outlook on Tuesday: Up on USDA revisions, outside markets



Chicago Board of Trade corn futures are expected to open higher Tuesday following the government's unprecedented revision of crop production and ending stocks estimates, traders said.


Corn is called 10 to 12 cents higher. In overnight trading, corn was up 24 1/2 cents to US$4.09 3/4 per bushel and March corn was up 23 3/4 cents to US$4.26.


Overnight trading was driven by anticipation of the revisions, which were released Tuesday morning following an announcement Monday by the U.S. Department of Agriculture.


The government cut production to 12.033 billion bushels, from 12.200 billion in its Oct. 10 report, and cut yield to 153.9 bushels per acre, down from 140 bushels. Ending stocks were cut to 1.008 billion bushels, down from 1.154 billion.


The numbers were supportive, traders said, but probably not bullish enough to drive gains similar to the overnight action.


"I don't think you're going to see what we got last night," a trader said.


Anticipation of the report prompted short-covering among traders who anticipated a highly bullish revision. A trader said the numbers could prompt, at the least, a short-term reversal in the market's technical momentum after weeks of losses.


"It's a surprise, but the carryout's not overly bullish," a trader said.


In addition to cutting planted acreage, to 85.9 million bushels from 86.9 million, the government also cut export and feed and residual use slightly.


An analyst said the report removes some of the "cushion" in corn's supply and demand.


"One thing the trade will have to factor in, is how much of the support from the report was dialed in overnight, with some pretty strong price performances already absorbed," said Don Roose, president of U.S. Commodities in West Des Moines.


Although the yield was cut slightly, it still represents an increase from the government's September estimate. Analysts have said historically there is a strong precedent for continued yield increases in November if the government already boosted yields in October.


Outside markets are expected to provide additional support Tuesday, traders said, with stability in equities markets and a weaker U.S. dollar.


Weather is expected to be beneficial to the crop during the next week, analysts said, with dry conditions that will allow farmers to resume field work after soggy weather last week.


The next downside price objective for the bears is to push and close prices below solid technical support at Monday's low of US$3.64, a technical analyst said. The next upside price objective is to push and close prices above solid technical resistance at last week's high of US$4.27 3/4.

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