CBOT Corn Outlook on Friday: Lower on dollar strength, China concerns

 

 

Overnight, CBOT corn prices fell, pressured by a sharp rise in the U.S. dollar following China's central bank move to raise the reserve requirement ratio for banks. Tighter restrictions on reserves adds to recent moves by the Asian nation to start to limit credit. That makes it more difficult for importers to buy commodities.

 

March corn fell 3 cents lower at US$3.60 1/4 a bushel.

 

Commodities in general were weaker because of the dollar strength and the moves by China. The Chinese action comes just ahead of their Lunar New Year's holiday. Next week much of the country will shut down to celebrate the holiday.

 

Don Roose, president of U.S. Commodities in Des Moines, added that economic problems in the European Union, highlighted by Greece's woes, are adding to the negative environment, as they steer more investors to the dollar.

 

Headed into Friday's trade the market had climbed modestly each day this week. The rally has been supported by tighter basis, or the difference between cash and futures prices, due to farmers' reluctance to sell.

 

"What we've been trying to do is entice grain away from the producer," Roose said.

 

Fundamentally, large supplies and unremarkable export demand are limiting the upside, traders say.

 

U.S. Department of Agriculture said corn export sales for the week ended Feb. 11 were 743,200 metric tonnes for the 2009-10 marketing year and 6,900 metric tonnes for the 2010-11 marketing year. That is within trade expectations of 650,000 to 900,000 tonnes for both years combined.

 

USDA released the export sales one day later than usual because the federal government was closed for much of this week after record snow storms hit the capital.

 

Sales for the current marketing year were down 20% from the previous week and 21% from the four-week average. South Korea and Japan were the biggest buyers.

 

Traders and analysts add that with the market closed Monday for the Presidents Day, there will likely be evening of positions Friday, and reluctance to take on any new risky positions.

 

The next downside price objective for the bears is to push and close prices below solid technical support at last week's low of US$3.47 1/2 a bushel, a technical analyst said. Bulls' next upside price objective is to push prices above solid technical resistance at last week's high of US$3.68 1/4 a bushel.

 

First resistance for March corn is seen at this week's high of US$3.65 1/2 and then at US$3.68 1/4, the technical analyst said. First support is seen at Thursday's low of US$3.59 1/2 and then at US$3.55 1/4.

 

Farm Futures said in a morning commentary that a close below US$3.60 would suggest "seasonal consolidation, rather than any new uptrend."