January 19, 2010

 

CBOT Corn Outlook Tuesday: Down 2-4 cents as market tests recent low

 

 

Chicago Board of Trade corn futures are expected to open weaker Tuesday amid follow-through selling and technical pressure following last week's slide.

 

Corn is called 2 to 4 cents lower. In overnight trade, March corn was down 3 1/2 cents to US$3.68 per bushel and May corn was down 3 cents to US$3.79.

 

The market is still "digesting" the bearish Jan. 12 crop report from the U.S. Department of Agriculture, which said the 2009 corn crop was much larger than analysts expected, said Shawn McCambridge, senior grains analyst for Prudential Bache. He said that report will continue to "chase longs out of the market," and

 

Analysts add that the market tested its post-report low of US$3.68 in the overnight session, a level that will remain a target Tuesday, McCambridge said.

 

The market now looks bearish technically, which is inspiring more selling, a trader said.

 

"The funds still have some length, and that's trouble for bulls," a trader said.

 

The Commodity Futures Trading Commission's supplemental commitments of traders report Friday showed that as of Jan. 12, traditional speculative funds were net long 185,538 contracts, although that report did not account for all of the post-USDA-report liquidation.

 

McCambridge said that typically the market enters a lull following the USDA report. There will likely be little fundamental news for the market to digest, as it is too early to focus on spring planting weather.

 

He said the trade will be watching to see if the break in prices causes export demand to pick up over the next couple of weeks.

 

In export news Tuesday, private exporters reported export sales of 116,000 metric tonnes of corn for delivery to unknown destinations so far in the 2009/2010 marketing year, USDA said Tuesday.

 

Managed money accounts tacked on both long and short CBOT corn positions in the week ended Jan. 12, according to the CFTC's Disaggregated Commitments of Traders report on Friday. The report showed the managed money category added 9,946 long contracts, for a total of 267,441, and added 8,877 short contracts, for a total of 37,115.

 

Meanwhile, index funds, which were rebalancing during this period, added 31,719 corn long positions while adding just 229 short positions, according to the CFTC's supplemental commitments of traders report.

 

A technical analyst said that serious chart damage has occurred recently. The next upside price objective is to push and close prices above major psychological resistance at US$4.00 a bushel, he said. The next downside price objective for the bears is to push and close prices below solid technical support at US$3.50 a bushel.

 

First resistance for March corn is seen at US$3.75 and then at US$3.80, the technical analyst said. First support is seen at last week's low of US$3.68 and then at US$3.65.