February 5, 2009

Chicago Board of Trade corn futures are expected to open slightly higher following overnight gains and a third consecutive week of strong export sales, analysts said.

 

Corn is called 1 cemt to 3 cents higher. In overnight trading, March corn was up 3/4 cent to US$3.59 per bushel, May corn was up 1/4 cent to US$3.69 and July corn was up 1/4 cent to US$3.79 1/2.

 

Weekly export sales reported Thursday morning were strong, topping 1 million metric tonnes for the third week in a row. The U.S. Department of Agriculture reported net sales at 1.212 million metric tonnes for the week ended Jan. 29, up from 1.108 the previous week. Analysts had projected sales between 550,000 and 1 million metric tonnes.

 

The sales provide an underpinning of support, but won't spark a strong rally, traders and analysts said.

 

"It's helpful, it's good, it puts some support in the market, but you can't say it's bullish," said John Kleist, broker/analyst at Allendale.

 

"On any substantial move (higher), you're likely to cut that demand off again, and you can't afford to do that," he added.

 

Outside markets were modestly supportive overnight, with higher crude oil and gold and a weaker dollar contributing to gains, analysts said.

 

Fundamentals remain weak, traders and analysts said. The main bullish influence in recent weeks, dryness in South America, has turned negative for the market in recent days, due to rainfall in Argentina. If more rains emerge next week, soybeans could drop further, dragging corn with it, a trader said.

 

Brazil's corn crop is expected to be smaller because of this year's hot, dry weather. The country should produce 50.3 million metric tonnes of corn in 2008-09, the National Commodities Supply Corp., or Conab, said Thursday. Total production is seen falling as much as 14.2% from the 2007-08 season.

 

Conab's crop estimate is also lower than its Jan. 8 estimate of 52.2 million metric tonnes of corn in 2008-09.

 

There are some "definitive opinions" in the market about whether it has set a seasonal bottom, Kleist said. The market needs to close below the week's low at US$3.56 to extend the decline, he said.

 

The next downside price objective for the bears is to push and close prices below solid technical support at the November low of US$3.52 1/4 a bushel. The next upside price objective is to push and close prices above solid technical resistance at US$3.85 3/4.

 

First resistance for March corn is seen at US$3.65 and then at Wednesday's high of US$3.69 1/4. First support is seen at Wednesday's low of US$3.55 3/4 and then at US$3.52 1/4.