January 14, 2009

 

CBOT Corn Outlook on Wednesday: Expected to rebound as soybeans support

 

 

Chicago Board of Trade corn futures are expected to open higher Wednesday following overnight gains, as the market looks for support after two days of losses and follows soybeans, analysts said.

 

Corn is called 4 cents to 6 cents higher. In overnight trading, March corn was up 4 cents to US$3.66 1/2, May corn was up 5 1/4 cents to US$3.78 1/2 and July corn was up 4 3/4 cents to US$3.88 1/4.

 

The market has dropped almost 50 cents this week following the Monday morning release of bearish production and carryout estimates from the U.S. Department of Agriculture. Soybeans also dropped sharply following the report, but rebounded Tuesday and remained strong overnight. Soybeans had already been leading corn prior to the report.

 

Although the USDA report quieted notions that corn prices need to climb in order to buy acres, planted acreage could become more of a consideration if soybeans continue to climb.

 

"We can't let corn get too far behind," said Jerry Gidel, analyst for North America Risk Management Services. "But it doesn't have to be one-for-one either."

 

The USDA's projected carryout Monday of 1.79 billion bushels highlighted corn's weak demand picture, which has weighed on the market. Analysts note recent buying of U.S. corn by South Korea gives the market a little boost.

 

Analysts said the market could also get support from weather in Argentina, which has been dry and is expected to remain mostly dry through the weekend. DTN Meteorlogix notes "increasing stress to pollinating corn through central Argentina due to hot, dry weather."

 

With prices down about 60 cents from their recent highs, end-users will increasingly become buyers, providing a floor for the market, some analysts said. Support is seen around US$3.50 in the March contract.

 

The next downside price objective is to push and close prices below solid technical support at US$3.50 per bushel, a technical analyst said. The next upside price objective is to push and close prices above major psychological resistance at US$4.00.

 

First resistance for March corn is seen at US$3.75 and then at US$3.80. First support is seen at Tuesday's low of US$3.61 3/4 and then at US$3.50.

 

In international news, French corn production for 2008-2009 was revised upwards slightly to 15.7 million tonnes, a 10% increase on the year, according to figures published Wednesday by L'Office National Interprofessionnel des Grandes Cultures.