January 26, 2010

 

CBOT Corn Outlook on Tuesday: Down 2-4 cents on supplies, stronger dollar

 

 

Chicago Board of Trade corn futures are expected to open lower Tuesday amid a stronger dollar and concerns about China's growth that are weighing on commodities generally, analysts said.

 

Corn is called 2 cents to 4 cents lower. In overnight trade, March corn was down 4 1/2 cents to US$3.63 1/4 per bushel and May corn was down 4 3/4 cents to US$3.74.

 

Modest gains Monday were fueled by short-covering and ideas that the market was oversold, traders said. But the market's upside potential is limited, and with concerns about a tighter monetary policy in China flaring up overnight, corn and other grains could move lower while the dollar climbs, analysts said.

 

"In addition to ongoing worries about adequate supplies, pressure from a resurgent dollar is driving bearish sentiment this morning," Farm Futures Senior Editor Bryce Knorr said in a morning commentary.

 

The market has been under pressure ever since the U.S. Department of Agriculture on Jan. 12 estimated a record 2009 crop, much larger than expected. Coupled with expectations that producers will plant an additional 3 million acres or more of corn in 2010, the government's estimate indicates supplies will be ample this year.

 

Adding to the bearish supply outlook is the weather in South America, which is helping to nurture what analysts say could be record crops there.

 

Market bulls are hoping for an uptick in demand on the break. While weekly export sales reported Friday were huge, topping 1.6 million metric tonnes, weekly export inspections released Monday were well below trade expectations.

 

Traders note that a few countries have issued tenders, potentially leading to more U.S. business.

 

"We would expect the bulls will want to see another 1.0 [million metric tonne] export sales report Thursday of this week to confirm that the decline in the flat price has generated demand," Benson Quinn Commodities analyst Jon Michalscheck said in a commentary.

 

Tuesday morning the USDA announced that 118,000 metric tonnes of U.S. corn had been sold to unknown destinations.

 

Technically, "the recent pause at lower price levels isn't a bullish clue," technical analyst Jim Wyckoff 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, the technical analyst said. Bulls' next upside price objective is to push prices above solid technical resistance at US$3.92 1/2 a bushel, which is the top of the recent downside price gap on the daily bar chart.

 

First resistance for March corn is seen at Monday's high of US$3.69 1/4 and then at US$3.72, Wyckoff said. First support is seen at Monday's low of US$3.65 1/4 and then at last week's low of US$3.62 1/4.