January 4, 2010

 

CBOT Corn Outlook on Monday: Up 7-9 cents on weak dollar, strong crude

 

 

Chicago Board of Trade corn futures are poised to open higher Monday following overnight gains on a weaker dollar and stronger crude oil.

 

Corn is called 7 to 9 cents higher. In overnight trade, March corn was up 9 1/4 cents to US$4.23 3/4 per bushel and May corn was up 9 1/4 cents to US$4.33 1/2.

 

Commodities in general are expected to be higher thanks to the weaker dollar, analysts said. Corn is getting an added boost from crude oil, which is surging past US$80 per barrel thanks to cold winter weather that is driving up heating demand. Corn is linked to the energy markets because of its role in ethanol.

 

The March contract gained last week in choppy trade and is at the upper end of the trading range that has contained it for the past two-and-a-half months. It is approaching key resistance in the US$4.25 area, according to analysts.

 

Anticipation of index fund rebalancing supported the market in the waning days of 2009. Some traders questioned whether the rebalancing had already started, and most said traders were buying in anticipation of an influx of index fund money.

 

"Funds are believed to be ready to increase allocations to corn, trying to get in position for a pick up in food inflation over the next year," Farm Futures Senior Editor Bryce Knorr said in a morning commentary.

 

AgResource Co. on Monday said that the rebalancing will start later this week and could add 55,000 to 57,000 contracts of new demand to the market.

 

Also underpinning the market is concern about the 2009 crop, some of which remains in the field, unable to be harvested after a wet fall and winter snow. The U.S. Department of Agriculture will release what is normally a final crop estimate on Jan. 12, and analysts say it could reduce the crop size.

 

But demand is considered to be relatively weak, as export sales have been stronger in recent weeks but actual shipments have been slow. Analysts on Monday said that Egypt has issued a tender for 75,000 metric tonnes of U.S. corn.

 

The next upside price objective is to push and close prices above strong technical resistance at the November high of US$4.25 a bushel, a technical analyst said. The next downside price objective for the bears is to push and close prices below solid technical support at last week's low of US$4.00 1/2 a bushel.

 

First resistance for March corn is seen at last week's high of US$4.18 3/4 and then at the December high of US$4.21 1/4. First support is seen at Thursday's low of US$4.12 and then at US$4.08.