January 14, 2010

 

CBOT Corn Outlook on Thursday: Seen down 3-5 cents on follow-through selling

 

 

Follow-through selling and bearishness about the large U.S. crop should pressure Chicago Board of Trade corn futures early Thursday, but index fund buying is expected in the market ahead of the close.

 

CBOT March corn is called to open 3 to 5 cents per bushel lower. In overnight electronic trading, CBOT March corn fell 4 3/4 cents to US$5.79 1/4.

 

Prices are expected extend their slide at the opening after falling since the U.S. Department of Agriculture on Tuesday raised its estimate for U.S. corn production above trade expectations. The market is "still adjusting to the big crop projected by the government" but appears to be trying to consolidate after falling the past two sessions, according to a note from Farm Futures.

 

Index funds are expected to continue buying the grains in late dealings as part of a rebalancing process. Fund buying gave the market some "artificial support" late Wednesday and helped the market close near its session high, said Don Roose, president of U.S. Commodities.

 

Despite the support from fund buying, corn has suffered "serious near-term technical damage" this week, a technical analyst said. The losses "strongly suggest that a market top is in place," he said.

 

Bulls' next upside price objective is to push and close March corn above major psychological resistance at US$4.00, the technical analyst said. The next downside price objective for the bears is to push and close the contract below solid technical support at US$3.50, he said.

 

First resistance for March corn is seen at Wednesday's high of US$3.85 1/4 and then at US$3.92 1/2, which is the top of Wednesday's downside price gap on the daily chart. First support is seen at US$3.79 and then at US$3.75.

 

Weekly U.S. corn export sales were "poor" at 327,300 tonnes, a trader said. The export sales were down 10% from the previous week, 67% from the prior four-week average and toward the low end of analysts' expectations, which ranged from 250,000 to 700,000 tonnes.

 

It appears the U.S. Department of Agriculture is overstating U.S. corn exports by to 50 to 100 million bushels, Roose said. The USDA on Tuesday kept its export estimate unchanged from December at 2.05 million bushels.

 

In other news, the daily trading limit for CBOT corn returns to its standard of 30 cents after temporarily expanding to 45 cents on Wednesday. The limit expanded because corn on Tuesday closed down the 30-cent limit on USDA's bearish crop data.