January 5, 2009

 

CBOT Corn Outlook on Monday: Down 4-6 cents on strength in dollar

 

 

Chicago Board of Trade corn futures are expected to open lower Monday as a stronger dollar weighs on commodities, analysts said.

 

Corn is called 4 to 6 cents lower. In overnight trading, March corn was down 5 3/4 cents to US$4.06 1/2, May corn was down 6 1/4 cents to US$4.16 1/2 and July corn was down 6 cents to US$4.27.

 

The market has climbed three days in a row. But traders and analysts say the gains have come amid low-volume holiday trade. Activity is expected to pick up this week, the first full week of the new year, although trading was light overnight, analysts said.

 

A rally in the U.S. dollar is weighing on commodities, including gold and crude oil, which is putting pressure on corn.

 

"The stronger dollar also does nothing for U.S. export hopes, which remain rather dismal," Farm Futures senior editor Bryce Knorr said in a market commentary. "Weekly sales reported on Friday came in at just 10.6 million bushels, a marketing year low."

 

A technical analyst said corn is on a four-week uptrend on the daily bar chart. Many analysts and traders say the rally has come despite weak fundamental support, and that the market is overbought and due for a retracement. In early December, the nearby December contract bottomed out at US$2.90 per bushel.

 

Demand is also weak for ethanol and feed, and some analysts say corn's recent rally has only made business more difficult for ethanol producers.

 

DTN Meteorlogix calls for continued stress to corn and soybeans in Argentina this week, with highs well into the 90s. Recent showers and cooler temperatures have made for favorable conditions in Brazil, although "this week looks to be drier and warmer again."

 

The next upside price objective is to produce a close above technical resistance at the December high of US$4.23 3/4, a technical analyst said. The next downside price objective is to produce a close below solid technical support at last week's low of US$3.85.

 

First support is seen at US$4.07 3/4 and then at US$4.00, the technical analyst said. First resistance is seen at Friday's high of US$4.15 1/2 and then at US$4.20.