February 5, 2010

 

CBOT Corn Outlook on Friday: Down 1-2 cents on supply, technical momentum

 

 

Chicago Board of Trade corn futures are expected to open slightly lower Friday following overnight losses amid technical and fundamental pressure.

 

Corn is called 1 cent to 2 cents lower. In overnight trade, March corn was down 2 1/2 cents to US$3.51 1/2 per bushel and May corn was down 2 cents to US$3.63 1/4.

 

The market was unable to extend very modest overnight gains from Thursday's trade. The gains came despite bearish outside markets, including crude oil and the dollar, and followed a fresh four-month low.

 

Some traders said the climb demonstrated impressive resilience, but others were dismissive.

 

"We're just seeing small corrective efforts within a larger downtrend," a trader said Friday.

 

Despite the market's divergence from outside macro markets Thursday, traders said they will continue to keep an eye on those markets Friday, particularly as they digest new U.S. jobs data.

 

Large supplies are the key bearish factor in the market. In addition to a big U.S. 2009 crop and expectations of more planted acres in 2010, traders are expecting the U.S. Department of Agriculture to increase the size of South American crops in Tuesday's supply and demand report. The report will be released at 8:30 a.m. EST.

 

Analysts surveyed by Dow Jones Newswires expect on average the USDA to peg 2009-10 U.S. corn ending stocks at 1.748 billion bushels, down slightly from a January estimate of 1.764 billion, but above the prior year's total of 1.673 billion.

 

But the market's fundamentals may not support more significant losses, traders said. Some say that a large South American crop can't get much bigger in traders' eyes, and has already been factored into the market. End-user buying could also limit the downside, they said.

 

Traders and analysts also add that farmers' refusal to sell is underpinning prices, although some think that once the weather warms, quality problems will emerge and producers will be forced to unload.

 

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

 

First resistance for March corn is seen at Thursday's high of US$3.59 and then at US$3.63 1/2, the technical analyst said. First support is seen at US$3.50 and then at Thursday's low of US$3.49.