January 14, 2008

 

CBOT Corn Outlook on Monday: Up sharply on follow through, speculative buying

 

 

Chicago Board of Trade corn futures are expected to begin day-time trading 14 to 16 cents higher, pushed up by strong follow through buying from Friday's limit up close and speculative buying, analysts said.

 

In overnight electronic trading, March corn jumped 15 1/2 cents to US$5.10 1/2 per bushel, a new contract high and the highest level for a nearby corn contracts since the summer of 1996. Overnight electronic trading volume was near 14,000 contracts in March.

 

Follow through buying from Friday and spillover from the strong gains set in overnight trading will boost corn at the opening of day session trading, a commission house analyst said. The production and supply/demand reports caught people by surprise and speculative buying will also add to the upside strength.

 

"It will be hard to break the market today," the analyst said.

 

Technical buying is also expected to provide underlying support, a trader said. Additional strength in the nearby contracts should come from the new crop months which represent the crop that will be planted this spring.

 

Stronger outside markets might also add to the strength with energy, metals higher and the U.S. dollar weak, adding to concerns about inflation. Dry weather forecasts in Argentina over the next several days might also lend support, an analyst said.

 

A return to hot and dry weather this week will stress pollinating corn in Argentina, DTN Meteorlogix Weather said. Dry conditions are expected in the next 48 hours, with possibly a few light showers on Wednesday. Temperatures are expected to average near-to-above normal through Friday, Meteorlogix Weather said.

 

On daily technical charts, March corn opened and closed up the 20-cent trading limit on the bullish crop report. Corn bulls are still in strong technical control and there are no strong technical clues that a market top is close at hand, a technical analyst said. The corn bull's next major upside objective is to push and close prices above resistance at US$5.00 per bushel. The bears' downside objective is to push prices below solid support at US$4.81 1/2.

 

First resistance for March corn is seen at US$5.00 and then at US$5.05. First support is seen at US$4.90 and then at US$4.85.

 

Large commercials traders increased their long Chicago Board of Trade futures and options on futures positions by 22,571 contracts and boosted their short positions by 36,669 contracts and are now net short 514,003 contracts as of Jan 8, the Commodity Futures Trading Commission reported Friday in the supplemental commitment of traders report.

 

Large speculative traders added 10,089 contracts to their long positions and trimmed their short positions by 1,062 contracts and are now net long 244,620 contracts the CFTC said. Index funds bumped up their long positions by 8,993 contracts and increased their short positions by 6,980 contracts and are net long 367,720 contracts, the CFTC said.

 

In other corn news, the Philippine feed milling industry would still like to import corn despite the high prices in global markets, the president of the Philippine Association of Feed Millers Inc. said Monday. In 2007, the government allowed the industry to import 400,000 metric tonnes but the industry was only able to import around 130,000 because of high import prices.

 

Corn prices in Asia are expected to keep rising this week, following the bullish price trend in CBOT futures and Friday's bullish crop report.

 

Corn futures on China's Dalian Commodities Exchange settled modestly higher with the benchmark Sept. contract up RMB8 at 1,842RMB/tonne.