February 17, 2010

CBOT Corn Outlook on Wednesday: Steady to down 1 cent amid profit-taking

Chicago Board of Trade corn futures are expected to open steady to slightly lower Wednesday amid profit-taking following the market's recent gains.

In overnight trade, March corn was down 3/4 cent to US$3.66 1/2 per bushel and May corn was down 3/4 cent to US$3.78 1/4.

Analysts are expecting the market will take a breather after rallying to a fresh three-week high on Tuesday. The market has climbed five of the past six sessions.

Fundamentally the market has little to "hang its hat on," Benson Quinn Commodities analyst Jon Michalscheck said in a commentary. Large supplies in the U.S. and favorable South American crop weather have been bearish factors in the market, and demand has been lackluster.

Weekly export inspections remain weak, and some analysts say there is growing concern from potential importers about the quality of the U.S. crop, and that some are looking elsewhere for corn. The 2009 crop was plagued in some areas by vomitoxin and by low test weights.

"Demand from international customers remains the biggest issue overhanging the trade," Farm Futures senior editor Bryce Knorr said in a morning commentary.

Firm cash prices have helped boost the market recently, traders said. A main reason for this is farmers' unwillingness to sell at prices more than 50 cents off January highs. But analysts say producer selling could pick up given the market's recent rally, and that they could feel more pressure to unload supplies once the weather starts warming up and crop quality possibly deteriorates.

While many view the crop's quality as bearish because of its possible impact on export demand, others note that with low test weights, livestock will need to eat more to maintain weight, which could deplete supplies faster.

Technical analyst Jim Wyckoff said the seasonal "February Break" phenomenon may be ending, "but right now the corn bears still have the overall near-term technical advantage."

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, Wyckoff said. The next upside price objective is to push prices above solid technical resistance at US$3.80 a bushel.

First resistance for March corn is seen at Tuesday's high of US$3.68 3/4 and then at US$3.72 3/4. First support is seen at Tuesday's low of US$3.62 and then at US$3.59.