February 1, 2010

 

CBOT Corn Outlook on Monday: Flat as market lacks reason to rally

 

 

Chicago Board of Trade corn futures are expected to open flat Monday following sideways overnight trade, as the market remains fundamentally and technically weak.

 

In overnight trade, March corn was flat at US$3.56 1/2 per bushel and May corn was unchanged at US$3.67 3/4.

 

Traders said that there's a lack of fresh news or direction from outside markets Monday. After tumbling about 70 cents from the month's high in January, farmers are not selling, and further losses could be subdued. But there is no reason to rally the market, traders said.

 

Large supplies have been the key fundamental factor in the market's recent slump, and bulls are counting on renewed demand thanks to the cheaper prices.

 

Soybeans and wheat also traded mostly sideways overnight, and traders said that outside macro markets, such as the dollar, could provide modest support.

 

Traders are watching the crops in South America, and despite some recent dryness, rains in Argentina over the weekend should ease any concerns about stress to the crop, traders said.

 

Managed money piled on short CBOT corn positions in the week ended Jan. 26, the Commodity Futures Trading Commission said Friday. The CFTC's disaggregated commitments of traders report showed that managed money accounts cut 8,768 contracts from their long positions, leaving them with 194,510, and added 26,994 contracts to their short positions, for a total of 99,201.

 

Meanwhile, the supplemental commitments of traders report showed that traditional speculative funds maintained a net long position, cutting 9,127 from their long positions and adding 26,033 to their short positions. That left them net long 56,194 contracts.

 

Traders have been watching the commitments of traders reports more closely lately, amid expectations that the market would be under pressure as long as there were new recent longs in the market eager to get out after the market plunged on a bearish Jan. 12 U.S, Department of Agriculture crop estimate.

 

"Usually before a trend bottoms out, you have to go (net) short," a trader said.

 

Technically, bears have the clear near-term advantage after hitting another fresh 3 1/2-month low Friday, 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, Wyckoff said. Bulls' next upside price objective is to push prices above solid technical resistance at US$3.73 a bushel.

 

First resistance for March corn is seen at US$3.60 and then at Friday's high of US$3.63 1/2. First support is seen at Friday's low of US$3.55 1/4 and then at US$3.50.

 

In other news, North Korean leader Kim Jong Il has vowed to end his people's dependence on corn, state media reported Monday, in a rare acknowledgment of his regime's failure to improve living standards.

 

Rodong Sinmun, the official newspaper of the North's ruling Communist Party, said Kim's immediate ambition is to end his people's dependence on corn for subsistence and to feed them with rice and wheat products instead.

 

"I'm the most heartbroken by the fact that our people are still living on corn," Kim was quoted as saying in a report monitored by South Korea's Yonhap news agency.