February 6, 2009

Chicago Board of Trade corn futures are expected to open higher Friday on follow-through buying from Thursday's rally, dry South American weather forecasts and improved export demand, analysts said.

 

Corn is called 3 cents to 5 cents higher. In overnight trading, March corn ended up 4 1/4 cents to US$3.75 1/2 per bushel, May corn ended up 4 1/4 cents to US$3.85 3/4, and July corn ended up 4 1/2 cents to US$3.96.

 

The market has an underpinning of support from export sales, which have exceeded 1 million metric tonnes for three weeks in a row, analysts said.

 

Those sales, along with supportive outside markets, have provided a boost, and the market's recent strength has raised the possibility that the market has set its seasonal low. The market appears to have support around US$3.55, analysts said.

 

"Ability to hold the test of 2009 lows this week could start to attract some seasonal buying on ideas winter lows are past," Farm Futures senior editor Bryce Knorr said in a market commentary.

 

There were more purchases of U.S. corn announced Friday.

 

South Korea's Major Feedmill Group has bought 110,000 metric tonnes of U.S.-origin feed corn in a private deal with trading firm Feednet, a trader in Seoul said Friday. Also, the Korea Feed Association has bought 55,000 metric tonnes of U.S. corn from trading house Cargill in a private deal. South Korea's Nonghyup Feed Inc. bought 110,000 metric tonnes of feed corn from trading house Cargill in a tender concluded late Thursday, a company official said Friday.

 

Forecasts calling for a return of dry weather in Argentina into next week are supporting corn and soybeans, a trader said. The dry weather most directly impacts soybeans because final crop production there is still "a moving target," a trader said. Damage to the corn crop is established already, but market prices will follow soybeans' direction, he said.

 

The market is looking ahead to Tuesday's USDA supply and demand report. Analysts on average expect the government to peg corn 2008-09 ending stocks at 1.838 billion bushels, up from 1.790 billion last month.

 

Analysts said the trade will look at least as closely at the government's projections for the crops in Brazil and Argentina, where drought has taken a toll.

 

The next downside price objective is to push and close March prices below solid technical support at this week's low of US$3.55 3/4 a bushel, a technical analyst said. 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$3.75 and then at US$3.80. First support is seen at US$3.70 and then at US$3.65.