January 16, 2007

 

CBOT Corn Outlook on Tuesday: Sharp rally seen on follow through

 

 

Chicago Board of Trade corn futures are expected to begin trading 18-20 cents higher Tuesday, following limit up moves in most months in overnight trade and follow through from Friday's limit up close after the bullish U.S. Department of Agriculture's production and stocks reports , sources said.

 

In overnight e-CBOT trading, March corn surged 20 cents higher to US$4.16 1/2 cents per bushel and May also ended 20 cents higher at US$4.27 1/2. e-CBOT volume in March was 33,296 contracts.

 

Corn should be limit up to start, a floor analyst said. It was sharply higher overnight and the market appears to be targeting the US$4.50 per bushel area, he said. However, there could be some trading Tuesday unlike in Friday's session, he added.

 

Friday's report was a shocker and the market will continue to trade higher as it digests the report, a floor trader said. There was no other news out to influence the market but there could be some index fund selling as they continue to rebalance their portfolios, he added.

 

Large commercial traders reduced their short corn futures and options positions, while index funds and large non-commercial traders reduced their long futures and options on futures positions in the period ending Jan. 9, the Commodity Futures Trading Commission reported Friday. Large commercial traders increased their long positions by 33,487 contracts and reduced their short positions by 30,414 contracts and are now net short 502,661 contracts. Index funds trimmed their long holdings by 14,530 contracts and increased their short positions by 1,411 contracts and are now net long 405,639 contracts.

 

Large non-commercial traders cut their long positions by 21,356 contracts while increasing their short positions by 14,076 lots and are now net long 212,214 contracts, the CFTC reported.

 

On day session open auction technical charts, March corn gapped open higher Friday and hit a fresh contract high and the highest price for corn in 10 1/2 years, a technical analyst said. The bulls are back in strong command of corn and their next price objective is closing prices above strong technical resistance at US$4.25. The bears' next near-term downside price objective is closing prices below solid support at US$3.59.

 

First resistance for March corn is US$4.00 and US$4.10 but prices should trade right through those levels on the opening, the analyst said. First support is seen at US$3.93 and US$3.88.

 

Cash corn basis bids were lower Tuesday. Central Illinois was 1 cent lower at 5 cents under the March future.

 

In other corn news, corn futures prices on China's Dalian Commodities Exchange finished slightly lower with the most-active September contract down RMB/5 at RMB1,764/tonne.

 

The CBOT announced Friday that it was raising margins on corn futures with the new margins effective as of the close of business Tuesday.

 

Tuesday, the U.S. Department of Agriculture is scheduled to release the weekly export inspections report at 11:00 a.m. EST (1600 GMT).