January 23, 2009

Chicago Board of Trade corn futures are expected to open slightly lower Friday following overnight losses amid bearish outside markets, but strong export sales should provide underlying support, traders said.

 

Corn is called 2 to 4 cents lower. In overnight trading, March corn was down 5 1/2 cents to US$3.82 per bushel, May corn was down 4 3/4 cents to US$3.93 3/4 and July corn was down 5 1/2 cents to US$4.03 1/2.

 

The overnight downside momentum should be stalled by strong U.S. export sales reported Friday morning, traders said.

 

"There doesn't appear to be much bearish specific to our sector," a trader said. "I struggle to think that if we're going to be lower, we'll be much lower."

 

Net export sales for the week ended Jan. 15 were reported at 1.117 million metric tonnes, well above analyst expectations and a big jump from last week's net sales of 216,100 metric tonnes, which was a marketing year low. Sales were also strong in wheat and in soybeans.

 

The trade is closely eyeing weather forecasts calling for rain starting Sunday evening in Argentina, where a drought is causing growing concern about crop losses. A trader said the forecast appeared to be drier Friday morning, but that the market will closely watch mid-day forecast updates. The uncertainty about Sunday's weather could make traders cautious, he said.

 

Corn will likely be pressured by outside markets, including lower crude oil and a stronger dollar, traders said. The U.S. stock market is also poised to open lower. Equities have added pressure to commodities this week, traders said, as concerns about the economy and paltry demand grow.

 

Analysts note that the market has been trading a tighter range this week, and that major moving averages are converging. The action likely precedes a breakout that will decide the market's near-term direction one way or the other, analysts said.

 

The next downside price objective is to push and close March prices below solid technical support at last week's low of US$3.58 3/4 a 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 Thursday's high of US$3.94 3/4 and then at US$4.00, the technical analyst said. First support is seen at Thursday's low of US$3.78 1/2 and then at this week's low of US$3.76 1/4.

 

In other export news, South Korea's Nonghyup Feed Inc has bought a total 110,000 metric tonnes of U.S. and South American feed corn, a company official said Friday.

 

The first shipment, comprising 55,000 tonnes of U.S. corn, will be supplied by trading house Feednet at a premium of 115 U.S. cents a bushel to the Chicago Board of Trade May contract.