January 22, 2008

 

CBOT Corn Outlook on Tuesday: 15-20 cents lower on global recession fears

 

 

Chicago Board of Trade corn futures are expected to begin day session trading 15 to 20 cents lower Tuesday following a plunge in values in overnight trading. However, a cut in the federal funds rate by 75 basis points to 3.5% earlier Tuesday morning may temper the declines to some extent, analysts said.

 

In overnight electronic trading, March corn plunged 19 cents to US$4.79 1/4 per bushel. Electronic trading volume in March was over 23,000 contracts.

 

"Zero commodity news matters Tuesday," a commission house analyst said. Price direction will depend on how the equity markets react to the Fed rate cut news and how much liquidation pressure there will be in corn after the steep losses set in overnight activity.

 

The Fed cutting interest rates will provide some support but it remains to be seen how much will be generated, the analyst added.

 

The Fed cited a weakening economic outlook for the move to cut rates ahead of its regularly scheduled meeting next week.

 

The move could limit the downside in corn but it will depend on how the other markets respond, a floor trader said. Gold remains lower but has rebounded from steep losses set earlier and crude oil has trimmed its losses sharply as well, the trader said. Fundamentally, it rained over the weekend in parts of South America and more rain is expected this week, the trader said.

 

There is a chance for widely scattered thundershowers, with amounts of 0.25-0.75 inch and locally heavier in western crop areas Tuesday, DTN Meteorlogix Weather said. Mostly dry weather is forecast for Wednesday and Thursday before widely scattered showers and thundershowers should redevelop Friday or during the weekend, Meteorlogix Weather said. Temperatures should average near-to-above normal.

 

On daily technical charts March corn closed lower and at a bearish weekly low close, a technical analyst said. Overnight price activity suggests a sharply lower to limit down open Tuesday after sharply lower prices in overnight activity. Last week's price action did confirm a bearish "key reversal" down on the daily bar chart. The bull's next major upside objective is to push and close prices above psychological resistance at US$5.00 per bushel, with the next downside rice objective closing prices below solid support at US$4.81 1/2.

 

First resistance for March corn is seen at US$4.85, and then at US$4.90. First support is seen at US$4.78 1/4 and then at US$4.75.

 

Large commercials traders increased their short Chicago Board of Trade futures and options on futures positions by 39,873 contracts and added 27,621 contracts to their long positions and are now net short 526,255 contracts as of Jan 15, the Commodity Futures Trading Commission reported Friday in the supplemental commitment of traders report. Large speculative traders trimmed 1,901 contracts from their long positions and cut 967 contracts from their short positions and are now net long 243,687 contracts the CFTC said. Index funds boosted their long positions by 20,112 contracts and increased their short positions by 4,818 contracts and are net long 383,014 contracts, the CFTC said.

 

In other corn news, South Korea's Nonghyup Feed Inc is seeking to buy 330,000 metric tonnes of corn in a tender to be concluded Tuesday, a company official said.

 

China's corn exports in December fell 90.6% in December to 43,943 metric tonnes while total Chinese corn exports for 2007 rose 60% to 4.914 million metric tonnes, the country's General Administration of Customs reported Tuesday.

 

Corn futures on China's Dalian Commodities Exchange settled sharply lower with the benchmark Sept. contract RMB33 lower at RMB1,723/tonne.