February 9, 2009

Chicago Board of Trade corn futures are expected to open steady Monday as the market follows outside influences, cautiously awaiting Tuesday's supply and demand report, analysts said.

 

In overnight trading, March corn dipped 1/4 cent to US$3.77 per bushel, May corn was flat at US$3.87 1/2 and July corn was flat at US$3.97 3/4.

 

Tuesday's updated supply and demand tables from the U.S. Department of Agriculture will factor in Monday's trade, analysts said. Although the trade is expecting only a small increase in 2008-09 ending stocks, analysts said the potential is there for another big drop in demand, which would be bearish.

 

"There's some hesitancy ahead of the USDA report tomorrow morning," said Shawn McCambridge, senior grains analyst for Prudential Bache. "We're expecting a modest increase in ending stocks, but the USDA has been aggressive the past couple reports."

 

Analysts projected on average that U.S. carryout will be 1.838 billion bushels, which would be up from the USDA's estimate of 1.790 billion bushels last month. The USDA will release the report Tuesday at 8:30 a.m. EST.

 

In addition to the U.S. ending stocks, analysts said the trade will be looking at updated production estimates for South America, which has suffered through drought this growing season, particularly in Argentina.

 

Continued hot, dry weather in Argentina is seen as supportive. The weather has a most direct impact on the soybean crop, which has a later growing season, analysts said.

 

"I think the most significant damage has already been inflicted on the corn crop, and now they're just trying to hold it stable where it is at this point," McCambridge said. Soybeans, which were higher overnight, remain a leader of the corn market, a trader said. McCambridge said a weaker U.S. dollar and higher crude oil Monday could also provide support to corn.

 

Speculative funds added 3,774 contracts to their CBOT corn long positions and added 20,328 contracts to their short positions, putting them net short 43,906 contracts, the Commodity Futures Trading Commission said Friday.

 

The supplemental commitment of traders report also showed that commercial funds added 7,577 contracts to their long positions and cut 13,722 contracts from their short positions, putting them net short 101,871 contracts. Index funds cut 990 contracts from their long positions and added 1,333 contracts to their short positions, putting them net long 227,330 contracts, the CFTC said.

 

The next downside price objective is to push and close prices below solid technical support at last 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 major psychological resistance at US$4.00.

 

First resistance for March corn is seen at Friday's high of US$3.80 3/4 and then at US$3.86, a technical analyst said. First support is seen at US$3.75 and then at Friday's low of US$3.69 3/4.