January 8, 2010

 

CBOT Corn Outlook on Friday: Up slightly on dollar, index funds

 

 

Chicago Board of Trade corn futures are expected to open slightly higher Friday as traders await index fund rebalancing, with a weaker dollar adding support.

 

Corn is called 1 to 2 cents higher. In overnight trade, March corn was up 2 cents to US$4.19 1/2 per bushel and May corn was up 1 3/4 cents to US$4.29 3/4.

 

A slide in the dollar following worse-than-expected U.S. jobs data released Friday should support the market, although a trader said the data could also be interpreted as bearish for commodities, as it is a negative sign for the economy and could mean lowered demand expectations.

 

The market's upside Friday should also be limited by soybeans, which have been under assault from good South American weather and expectations of a huge crop there. That weather also likely means a bearishly big corn crop, although the effect on the corn market is not as pronounced, traders said.

 

Traders are bracing for index fund rebalancing, which is expected to be bullish for corn. They say the rebalancing is likely to start today, and one said it typically starts later in the day. But traders say there's no way to know for sure when it will start--or if some rebalancing has already taken place.

 

The next upside price objective is to push and close March prices above strong technical resistance at this week's high of US$4.26 1/4 a bushel. The next downside price objective for the bears is to push and close prices below solid technical support at US$3.90 a bushel.

 

First resistance for March corn is seen at US$4.20 and then at Thursday's high of US$4.24. First support is seen at Thursday's low of US$4.14 1/2 and then at this week's low of US$4.13 1/4.

 

A floor trader notes that the market has had stiff resistance at US$4.50 in the December contract, as producers make sales in the back months.

 

The trade is awaiting next week's key U.S. Department of Agriculture reports, which are expected to be mildly bullish.

 

Analysts surveyed by Dow Jones Newswires are on average expecting the U.S. Department of Agriculture to estimate the 2009 corn crop at 12.819 billion bushels, down from its previous estimate of 12.921 billion.

 

Ending stocks for 2009-10 are projected at 1.613 billion bushels, down from the December estimate of 1.675 billion.

 

The USDA will release the estimates Jan. 12 at 8:30 a.m. EST.