February 16, 2010

 

CBOT Corn Outlook on Tuesday: Up slightly as traders watch dollar

 

 

Chicago Board of Trade corn futures are expected to open higher Tuesday following overnight gains on a weaker dollar.

 

Corn is called 2 to 3 cents higher. In overnight trade, March corn was up 3 cents to US$3.64 1/2 per bushel and May corn was up 2 1/2 cents to US$3.75 3/4.

 

The direction of corn and other commodities is being driven by the dollar, which is lower, traders said. They add that a strong close technically last week--the market posted weekly gains for the first time in four weeks--should encourage more buying.

 

Firm cash prices are also underpinning the market, as producers remain reluctant sellers.

 

But gains will likely be limited, traders said, and could vanish if the dollar strengthens.

 

Fundamentally there's little reason for the market to rally strongly, traders add. The market has plenty of competition thanks to big South American supplies and the presence of feed wheat, and quality concerns with U.S. corn could hurt export business, analyst say.

 

Managed money accounts added to their CBOT corn short positions in the week ended Feb. 9, the Commodity Futures Trading Commission said Friday. The disaggregated commitments of traders report showed that managed money accounts cut 10,367 contracts from their long positions, leaving them with 179,046, and added 24,614 contracts to their short positions, for a total of 138,136.

 

Meanwhile the supplemental commitment of traders report showed traditional speculative funds moving to a net short position. The speculative funds cut 16,197 contracts from their long positions and added 22,838 to their short positions, leaving them net short almost 5,000 contracts.

 

The supplemental report is supportive, a trader said, as it shows that the speculators are "shorter than we thought." As the market swooned during the past month, traders have been waiting for the slump to chase new recent longs out of the market.

 

Despite modest gains last week, "there are still no early technical clues that a market bottom is close at hand," technical analyst Jim Wyckoff said.

 

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

 

First resistance for March corn is seen at last 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 Friday's low of US$3.57 1/2 and then at US$3.55 1/4.