CBOT Corn Outlook: Down 1-3c; Higher Supply Forecasts

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CHICAGO (Dow Jones) - U.S. corn futures are expected to start Friday's day session lower, succumbing to pressure from higher than expected government supply forecasts.

Analysts expect corn to open 1 cent to 3 cents lower.

In overnight electronic trading, March corn was 3 1/2 cents higher at $5.77 3/4.

The U.S. Department of Agriculture raised its projection for the U.S. corn end-of-year supplies 5 million bushels to 832 million in contrast to market expectations for the government to tighten supply forecasts.

The report was a little negative for corn prices, disappointing to market bulls looking for confirmation of smaller inventories, said Jack Scoville, vice president Price Futures Group in Chicago.

U.S. corn imports were raised 5 million bushels with record production reported for Canada. U.S. corn ending stocks were raised accordingly.

"USDA increased the corn carryover through -- of all things -- an increase in corn imports into the United States, [from Canada]," said Rich Balvanz, market consultant, AMS Commodities, Marion, Iowa. Oddly, USDA didn't indicate any reduction in U.S. corn exports, due to the large supply of low grade wheat in Australia, he added. Traders and analysts had expected the USDA would most likely drop its ending stocks forecast due to strong demand for ethanol.

The market should garner further pressure from world carryout projections, as USDA raised its global end-of-year supply totals at a time when market participants were betting on shortages of corn, Scoville said.

USDA estimated world corn ending stocks at 130 million metric tons, up from 129.2 million reported in November.

Nevertheless, losses are expected to remain limited as the long-term outlook for corn remains supportive with U.S. supplies still projected to reach a 15-year low by Aug. 31, 2011, the end of the crop's marketing year, analysts said.

Meanwhile, dryness in Argentina, the second-largest corn exporter after the U.S., is providing some tough growing conditions for corn crops, a supportive factor adding price strength.

Strong demand for corn from the ethanol industry remains a draw on corn inventories, and with reports that the U.S. Congress was looking to extend a blender's tax credit at the current 45 cent level, demand is expected to continue to be strong, analysts added.

-By Andrew Johnson Jr., Dow Jones Newswires, (312) 347-4604 andrew.johnsonjr@dowjones.com


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