February 4, 2010

 

CBOT Corn Outlook on Thursday: Up slightly; market considered oversold

 

 

Chicago Board of Trade corn futures are expected to open slightly higher Thursday as the market consolidates following sharp losses Wednesday.

 

Corn is called 1 to 2 cents higher. In overnight trade, March corn was up 2 3/4 cents to US$3.55 3/4 per bushel and May corn was up 2 1/2 cents to US$3.67.

 

Traders and analysts said losses Wednesday were overdone, which is the only compelling reason for prices to climb Thursday.

 

"The support on the grain market only comes from an oversold, dead-cat bounce nature," said Don Roose, president of U.S. Commodities in Des Moines.

 

Analysts said Wednesday's drop was due largely to an increased South America crop projection by Informa Economics. Technically the market had a bearish drop to a new four-month low.

 

Outside markets are also a little bearish Thursday, traders said, with a stronger dollar and weaker crude oil likely to pressure corn on the open.

 

Traders and analysts have so far mostly shrugged at new Renewable Fuel Standard guidelines issued by the government Thursday.

 

"I think people thought there was not a whole lot new that was going to come out of it, and that guess was right," Roose said.

 

Roose and others noted that it did not change the outlook for corn demand for ethanol in coming years, and highlighted the fact that corn demand will ultimately be capped.

 

Analysts also noted that the government's cellulosic ethanol projections were much smaller than expected but added it was unclear what effect, if any, that would have on corn.

 

The U.S. Department of Agriculture reported weekly net export sales of 926,200 metric tonnes, all but 3,000 metric tonnes for the 2009-10 marketing year. That is slightly higher than the prior week's total of 902,300 metric tonnes. Analyst guesses had ranged from 700,000 to 1 million metric tonnes.

 

Overall the fundamentals for corn are weak, traders said, due to the large supplies in the U.S. and South America. A lack of farmer selling could continue to limit the downside, one floor trader said.

 

The next downside price objective for the bears is to push and close prices below solid technical support at US$3.40 a bushel, a technical analyst said. Bulls' next upside price objective is to push prices above solid technical resistance at Wednesday's high of US$3.68 1/4 a bushel.

 

First resistance for March corn is seen at US$3.55 1/4 and then at US$3.58 3/4. First support is seen at Wednesday's low of US$3.52 3/4 and then at US$3.50.