February 20, 2009

Chicago Board of Trade corn futures are expected to open lower Friday following overnight losses as financial turmoil weighs, analysts said.

 

Corn is called 1 to 3 cents lower. In overnight trading, March corn was down 3 1/4 cents to US$3.50 per bushel, May corn was down 3 cents to US$3.59 and July corn was down 3 cents to US$3.68 1/2.

 

Lower equities, weaker crude oil and a stronger dollar are expected to pressure corn Friday, outweighing another strong week of export sales, a trader said. Equities plunged to new lows Thursday, and the commodity sector is struggling because of demand concerns, he said.

 

Export demand should continue to provide underpinning support, as weekly net export sales were strong for the fifth straight week. The USDA on Friday reported net sales of 1.332 million metric tonnes for the week ended Feb. 12, down 14% from last week's marketing year high but up 9% from the prior 4-week average. Analysts expected sales between 800,000 and 1.2 million metric tonnes.

 

Top buyers included Japan (461,000 metric tonnes), Taiwan (348,200), Mexico (253,300) and South Korea (166,000). A trader said the biggest surprise was Taiwan's business.

 

Despite the stronger sales, analysts note that demand is weak in the ethanol and feed sectors, and is unlikely to rebound any time soon due to the weak global economy.

 

Corn and wheat "are already heavily short," and should outperform soybeans Friday, a trader said.

 

The US$3.50 area for March corn figures to be a battleground, as it has all week, traders and analysts said. There are still nearly 13,000 March US$3.50 puts that expire Friday. Some see the market's ability to hold above US$3.50 for most of this week as an encouraging sign, although others say the technical charts still look bearish.

 

Country Hedging points out in a morning outlook that corn appears headed for its 7th straight weekly decline. Including overnight trade the March contract is down 13 1/4 cents.

 

The next downside price objective for the bears 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 Thursday's high of US$3.64 3/4 and then at US$3.66 1/4, the technical analyst said. First support is seen at Thursday's low of US$3.57 and then at this week's low of US$3.55 1/4.