December 11, 2008

 

CBOT Corn Outlook on Thursday: Expected to drop on jump in carryout

 

 

Chicago Board of Trade corn futures are expected to open lower Thursday after a government report showed a greater-than-expected climb in U.S. corn ending stocks.

 

The U.S. Department of Agriculture's supply and demand report pegged 2008-09 corn ending stocks at 1.474 billion bushels, up from November's estimate of 1.124 billion bushels and higher than an analysts' average estimate of 1.232 billion bushels. The government's projection was outside the range of pre-report estimates from analysts.

 

Corn is called 10 cent to 15 cents lower, with the bearish impact of the report potentially being limited by outside markets, analysts said.

 

"It certainly could take a dump today, based on the amount of rally we've seen in the last few sessions," said Rich Balvanz with AMS Commodities.

 

A sharp break in the dollar overnight is the bigger news for the market, said Arlan Suderman, analyst for Farm Futures. But he noted that the USDA cut ethanol demand by 300 million bushels and export demand by 100 million bushels, partially offset by a 50 million bushel increase in feed consumption.

 

"I think the USDA did us a favor getting the bad news out early, quicker than I expected," Suderman said. "I think that will be healthier for the market in the long run."

 

Suderman expects the market will open lower in reaction to the report but will soon turn back to outside markets.

 

In addition to a weaker dollar, corn could have support from outside markets, including crude oil, which is higher.

 

The USDA also released strong export sales numbers Thursday morning. Net U.S. corn export sales totaled 1.059 million metric tonnes for the 2008-09 and 2009-10 marketing years. Mexico and Japan were larger buyers.

 

The sales were up sharply from the prior week's total of 392,000 metric tonnes. Trade estimates had ranged from 500,000 to 1.070 million metric tonnes.

 

Analysts said the bearish supply and demand report will be an important test of the market's recent upside momentum.

 

The next downside price objective is to push and close March prices below major psychological support at US$3.00, a technical analyst said. The next upside price objective is to push and close prices above solid technical resistance at US$3.50.

 

First resistance for March corn is seen at Wednesday's high of US$3.44 1/2 and then at US$3.50, the technical analyst said. First support is seen at US$3.36 3/4 and then at US$3.30.

 

In overnight trading, December corn was down 3/4 cents to US$3.26 per bushel, March corn was up 1 1/2 cents to US$3.43 1/2 and May corn was up 2 3/4 cents to US$3.55 1/2.