January 7, 2009

 

CBOT Corn Outlook on Wednesday: Down 2-4 cents; overnight theme, profit taking

 

 

Chicago Board of Trade corn futures are expected to open lower Wednesday following overnight losses, as profit taking helps put the brakes on corn's rally.

 

Corn is called 2 to 4 cents lower. In overnight trading, March corn was down 4 cents to US$4.23 1/2 a bushel, May corn was down 3 1/4 cents to US$4.34 3/4 and July corn was down 3 1/4 cents to US$4.44 3/4.

 

Corn should open lower in line with overnight losses, and its direction later in the session will likely be based on outside markets, said Shawn McCambridge, senior grains analyst with Prudential Bache.

 

"In general, conditions are overbought and we could see a little bit of profit taking as we get a little closer to the USDA reports next week," McCambridge said.

 

The U.S. Department of Agriculture will release total production, ending stocks and quarterly grain stocks reports Monday at 8:30 a.m. EST. Analysts say there is increased uncertainty heading into the January reports this year because of the late harvest, which has raised questions about possible production losses.

 

The market has shown recent strength despite continued lackluster demand, which has helped keep a lid on the market. Open interest declined on Tuesday's rally by 414 contracts, and traders say there are still signs that corn's recent gains are due mostly to short-covering.

 

Traders say that increased farmer selling has also limited corn's rally, although McCambridge said that is only a minor factor.

 

"I don't doubt we're seeing some increase in movement, but it certainly hasn't been overwhelming because basis levels have held in there pretty steady," McCambridge said.

 

The trade continues to monitor weather, although analysts have differing views on whether corn is getting support from South America forecasts. Forecasts call for some rain in Brazil and Argentina this weekend, but some traders say the region, particularly Argentina, is still too dry entering a crucial pollination period.

 

Benson-Quinn Commodities analyst Jon Michalscheck said in a market commentary that some technical traders are focusing on a possible test of an Oct. 6 gap area in the March contract, running from US$4.66 1/2 to US$4.72.

 

The next downside price objective is to push and close March prices below major psychological support at US$4 a bushel, a technical analyst said. The next upside price objective is to push and close prices above solid technical resistance at US$4.50.

 

First resistance for March corn is seen at Tuesday's high of US$4.29 and then at US$4.38, the technical analyst said. First support is seen at US$4.20 and then at US$4.16.