January 6, 2009

 

CBOT Corn Outlook on Tuesday: Up 5-7 cents as crude, soy support

 

 

Chicago Board of Trade corn futures are expected to open higher Tuesday on overnight gains as the market rides support from higher crude oil and soybeans, analysts said.

 

Corn is called 5 cents to 7 cents higher. In overnight trading, March corn was up 7 cents to US$4.18 1/4 per bushel, May corn was up 6 1/2 cents to US$4.28 and July corn was up 6 3/4 cents to US$4.38 1/4.

 

Despite a stronger dollar, which is usually bearish for commodities, crude oil has climbed above US$50, which is supportive to corn because of it's tie to ethanol. Soybeans also are offering support to corn, analysts said.

 

"The leader of the grain markets continues to be soybeans as it was the first to rally overnight, eventually bringing corn and wheat with it," DTN senior analyst Darin Newsom said in a morning commentary.

 

Weather in South America is a focus in the market, with some traders saying continuing dryness in Argentina is a concern for the corn crop. One floor trader sees the dry weather as the main catalyst for the market at the moment. But others note that recent rains have helped the crop in Brazil, limiting any support to the market from the weather in Argentina.

 

Traders note corn's strong technical performance during the past month, as the market is on a clear uptrend and above its 50-day moving average. But demand remains weak, limiting the market's upside potential, according to traders and analysts.

The next downside price objective for the bears is to push and close March prices below solid technical support at last week's low of US$3.85 per bushel, a technical analyst said. The bulls' next upside price objective is to push and close prices above solid technical resistance at the December high of US$4.23 3/4.

 

First resistance for March corn is seen at Monday's high of US$4.16 and then at US$4.20, the technical analyst said. First support is seen at Monday's low of US$4.02 and then at US$4.00.

 

Speculators added 2,706 contracts to their CBOT corn long positions and cut 6,524 from their short positions, putting them net short 21,295 contracts, the Commodity Futures Trading Commission said Monday.

 

The supplemental commitment of traders report, which was delayed because of the New Year's Day holiday, also showed commercial funds cut 18,130 contracts from their long positions and 3,966 from their short positions, putting them net short 161,789 contracts.

 

Index funds added 4,149 contracts to their long positions and cut 603 contracts from their short positions, putting them net long 239,557 contracts, the CFTC said.