February 8, 2006

 

CBOT Corn Outlook on Wednesday: Down 1-2 cents; follow through from Tuesday

 

 

Chicago Board of Trade corn futures are seen starting Wednesday's trading session on the defensive, pressured by follow through selling from Tuesday's poor technical close and weakness in outside markets.

 

Analysts expect corn futures to open 1 cent to 2 cents per bushel lower.

 

In overnight electronic trading, March corn was 1 1/2 cent lower at $2.16 1/2, and May corn was 1 3/4 cent lower at $2.26 2/4 per bushel.

 

The market is poised to extend Tuesday's correction from prior gains, with technical weakness, pressure from lower metals and energy markets and bearish fundamentals setting the stage for early declines, analysts said.

 

Market technicians said prices Tuesday closed near the session low and now there are early technical clues that a near-term top is in place. This week's high of $2.27 1/2 basis the March future is strong overhead technical resistance for futures to overcome, and a close below $2.15 would provide market bears with fresh downside technical momentum

 

First resistance for March corn is seen at $2.20 and then at $2.22. First support is seen at $2.17 3/4 - Tuesday's low - and then at $2.15.

 

Speculative fund buying that propelled futures to 5-month highs previously has seemingly dried up at higher levels, and without that buying support, the market's bearish underlying fundamentals are catching up, added a CBOT commission house broker.

 

However, traders will keep a close eye on fund activity for potential buying with trade positioning ahead of Thursday's crop report seen as a feature. The Goldman Sachs commodity index roll is expected to continue, keeping spreads active as the index adjusts positions ahead of the delivery period for March futures, traders added.

 

The U.S. Department of Agriculture is scheduled to release its monthly supply and demand report Thursday 7:30 a.m. CST (1330 GMT). The average of analyst estimates from a Dow Jones Newswires survey pegs corn ending stocks at 2.384 billion bushels from a range of 2.298 billion to 2.426 billion bushels. Analysts anticipate the government will show higher exports, ethanol usage and feed demand in the report.

 

DTN Meteorlogix Weather Service said a cold front moving in during today in Argentina may cause a few thundershowers but most of these should occur in Buenos Aires. No significant rainfall is forecast after today and through early next week.

 

In Brazil, the best chance for rain during the next 5 to 7 days is from Parana northward. Rio Grande Do Sul may trend drier during this period but it should not be very hot.

 

Rain and thunderstorms fell again in South African corn growing regions yesterday. Locally heavy rain during the past 48 hours may lead to some flooding, Meteorlogix said.

 

In overseas markets, corn futures on China's Dalian Commodity Exchange settled lower Wednesday on long liquidation. The benchmark September 2006 contract fell RMB43 to settle at RMB1,465/tonne. It hit limit-down at RMB1,448/tonne in the afternoon session, and remained at that level until trading ended.

 

Meanwhile, cash corn prices in some major producing regions in China remained unchanged this week, following the Chinese New Year break, compared with the week before last. The market had been quiet as most processors won't resume business until the end of the week, people in the industry said.