February 23, 2009

Chicago Board of Trade corn futures are expected to open 7 to 9 cents higher Monday following overnight gains on stable outside markets and ideas the market is oversold.

 

In overnight trading, March corn was up 9 1/4 cents to US$3.59 1/2 per bushel, May corn was up 9 1/4 cents to US$3.68 1/4 and July corn ended up 9 1/2 cents to US$3.78.

 

Modestly higher U.S. stock futures and crude oil should offer support Monday, traders said. But the market does not have much of its own bullish news, traders said.

 

Last week's "hammering" of the market has left it a little oversold, a trader said.

 

"It's tough to put your finger on," the trader said of overnight gains. "It certainly wasn't the weather," he added, referring to recent rains in South America that will help the soybean crop.

 

Analysts say that recent strong export demand has given the market underlying support. After setting a marketing year low, net sales have topped 1 million metric tonnes for five straight weeks.

 

In export news Monday, the U.S. Department of Agriculture announced sales of 108,000 metric tonnes of corn to South Korea.

 

Corn's recent losses have been limited compared to soybeans, which could begin to favor more corn planting, analysts said. Since Feb. 9, November soybeans have fallen 11.9%, to Friday's close at US$8.30 1/2 per bushel, while December corn has fallen 7.6% to US$3.89 3/4.

 

In international news, China is likely to buy 2 million metric tonnes of corn from the east producing areas to protect farmers' interests, said an industry source Monday. That would be on top of earlier purchase plans of a total of 40 million tonnes of corn from northeast producing areas.

 

Also, Malaysia purchased at least 71,000 metric tonnes of corn from India in the November-January period, and another 15,000 tonnes are likely to be delivered this month, trading executives said Monday.

 

Speculative funds cut 4,029 contracts from their CBOT corn long positions and added 21,430 contracts to their short positions, putting them net short 67,485 contracts, the Commodity Futures Trading Commission said Friday.

 

The supplemental commitment of traders report also showed commercial funds added 15,046 contracts to their long positions and cut 19,182 contracts from their short positions, putting them net short 75,035 contracts. Index funds added 726 contracts to their long positions and added 3,883 contracts to their short positions, putting them net long 224,487 contracts, the CFTC said.

 

The next downside price objective is to push and close March prices below solid longer-term technical support at US$3.50 a bushel. The next upside price objective is to push and close prices above solid technical resistance at US$3.90. First resistance for May corn is seen at Friday's high of US$3.63 1/4 and then at US$3.66 1/4. First support is seen at US$3.50 and then at US$3.45.