February 2, 2009

Chicago Board of Trade corn futures are expected to open lower Monday as outside markets and wetter South American weather weigh, traders said.

 

Corn is called 5 to 7 cents lower. In overnight trading, March corn was down 6 cents to US$3.73 per bushel, May corn was down 7 1/2 cents to US$3.82 3/4 and July corn was down 6 1/2 cents to US$3.94 3/4.

 

Weaker crude oil and an expected drop in U.S. equities, along with a stronger U.S. dollar, will set a bearish tone, traders said, as the world recession continues to take its toll on demand. Demand for corn is weak for feed and ethanol, and although export sales have been strong for two straight weeks, analysts said that sales for the marketing year are still well behind normal.

 

The trade continues to closely monitor weather in South America. "A relatively showery outlook for Argentina this week," is adding pressure Monday, a trader added. Traders went home Friday expecting some rain early this week, and forecasts are now slightly wetter, another trader added.

 

DTN Meteorlogix says that scattered showers in the major growing areas of central Argentina have eased stress on the crop, but that major crop losses are still likely due to stress on the crop during pollination.

 

The market has been trading in a tight range in recent days, and is stuck firmly between US$3.50 and US$4. But the corn market could be testing the lower end of its range, analysts said.

 

"March futures moved below two-week lows overnight, working into a gap from US$3.685 to US$3.73," Farm Futures senior editor Bryce Knorr said in a morning commentary. "Further support is another dime down if that level doesn't hold."

 

The next downside price objective is to push and close prices below solid technical support at the January low of US$3.58 3/4 a bushel. The next upside price objective is to push and close prices above major psychological resistance at US$4.

 

First resistance for March corn is seen at Friday's high of US$3.85 3/4 and then at US$3.90. First support is seen at US$3.76 1/4 and then at last week's low of US$3.72 1/2.

 

Speculative funds cut 4,986 contracts from their CBOT corn long positions and added 5,254 contracts to their short positions, putting them net short 27,353 contracts, the Commodity Futures Trading Commission said Friday.

 

The supplemental commitment of traders report also showed that commercial funds cut 4,007 contracts from their long positions and cut 13,846 contracts from their short positions, putting them net short 123,170 contracts. Index funds added 1,929 contracts to their long positions and cut 883 contracts from their short positions, putting them net long 229,654 contracts, the CFTC said.