January 27, 2010

 

CBOT Corn Outlook on Wednesday: Down 1-2 cents; technical pressure, large crops

 

 

Chicago Board of Trade corn futures are expected to open slightly lower Wednesday after overnight losses as abundant supplies continue to loom over the market.

 

Corn is called 1 to 2 cents lower. In overnight trade, March corn was down 1 1/4 cents to US$3.61 per bushel and May corn was down 1 1/2 cents to US$3.71 3/4.

 

After making new lows on Tuesday, technically the market is looking bearish, and there are few signs of fundamental support breaking the market out of its slump soon, traders said.

 

The main bearish factors are the 2009 crop, which, according to the U.S. Department of Agriculture, is a record; an expected increase in 2010 corn acreage; and favorable South America growing conditions that are fueling expectations of large crops there.

 

The market needs improved demand in order to halt its slide, analysts say. Analysts expect the USDA to report strong weekly net export sales on Thursday, although below last week's huge total of 1.6 million metric tonnes.

 

Terry Reilly, analyst of Citigroup, also noted that Taiwan opted for South American corn in a recent tender, which is bearish for the U.S. market.

 

Commodity traders will be keeping an eye on news out of a Federal Reserve Board meeting this afternoon, and are awaiting President Barack Obama's State of the Union speech Wednesday night, for any rhetoric that is negative for commodities, analysts said. The president's recent proposal for bank reform has been seen as a negative for commodities.

 

Outside macro markets appear to be a mixed influence Wednesday, analysts said.

 

Technically, the market gained more downside momentum by making new lows on Tuesday, analysts 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 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 US$3.65 and then at Tuesday's high of US$3.69. First support is seen at Tuesday's low of US$3.60 1/4 and then at US$3.55.

 

Reilly said that major support lies all the way down at US$3.30.

 

"We're going to have some negative outside influence to get down to that level though," he said.