February 19, 2009

Chicago Board of Trade corn futures are poised to open higher Thursday as both commodity and financial markets rebound, traders said.

 

Corn is called 2 to 3 cents higher. In overnight trading, March corn was up 3 1/2 cents to US$3.52 3/4 per bushel, May corn was up 3 cents to US$3.61 and July corn was up 2 3/4 cents to US$3.70.

 

The global recession has weighed on the market this week, but that pressure appears to have abated Thursday, as crude oil is higher and U.S. equities appear poised to rebound as well, traders said. That could prompt some short-covering, a trader said.

 

"I think we just ran out of gas on the downside," he said.

 

The dollar is lower, which is also supportive for commodities. Traders said there's little bullish news specific to the corn market.

 

Traders said nearby March corn could continue to hover around US$3.50, the strike price for a large number of March puts, which expire Friday.

 

"The market could be looking at the US$3.50 long and shorts willing to duke it out until the final session on Friday," Benson Quinn Commodities analyst Jon Michalschek said in a market commentary. "Price direction for the market past this Friday could very well be determined by how the open interest plays out as the options expire."

 

Corn could get spillover support from soybeans, traders said, as concerns about a farmers strike in Argentina have flared again. The forecast for Argentina remains wet, which is bearish, but already factored into the market, a trader said.

 

Weekly net export sales, which are normally released Thursday, have been pushed back until Friday because of Monday's Presidents Day holiday.

 

The next downside price objective is to push and close March prices below solid longer-term technical support at US$3.50 a bushel, a technical analyst said. The next upside price objective is to push and close prices above solid technical resistance at US$3.90.

 

First resistance for March corn is seen at Wednesday's high of US$3.61 1/4 and then at US$3.66 1/4, the technical analyst said. First support is seen at Wednesday's low of US$3.55 1/4 and then at US$3.50.

 

In international news, China will buy another 10 million metric tonnes of corn from its northeast producing areas, reflecting the government's determination to stabilize local prices.

 

Some have speculated that China's current stockpiling precedes large amounts of corn exports later on, although many say that is unlikely to happen soon.

 

A senior industry official said China's corn exports won't be able to return to the millions of metric tonnes of the past decade, nor will its imports jump in the next few years, said a senior industry official.

 

"Taking into consideration the rising (domestic) demand, little change in output, and the government's attitude, it's difficult for us to see exports back to 3 to 4 million tonnes a year," Gu Lifeng, deputy general manager of COFCO Agri-Trading & Logistics Co., told Dow Jones Newswires in an interview.