February 23, 2010

CBOT Corn Outlook on Tuesday: Down 1-2 cents in correction from Monday

Chicago Board of Trade corn futures are expected to open slightly lower Tuesday amid profit-taking as the market corrects following Monday's gains.

Corn is called 1 to 2 cents lower. In overnight trade, March corn was down 1 1/4 cents to US$3.70 1/4 per bushel and May corn was down 1 3/4 cents to US$3.81.

After surging on Monday to a five-week high, the market is overextended, traders said. That should prompt profit-taking, and outside markets will add to the pressure, as analysts note a stronger dollar and weaker crude oil.

"A corrective trading session lies ahead today with the health of the market determined by the depth and duration of the AM price drop," Ag Resource said in a morning commentary.

Monday's gains were attributed, in part, to heavy South American rains that have raised concern about what is expected to be a huge crop, as well as worries about the heavy snowpack throughout the northern Plains and the Midwest, and the potential for flooding and delayed planting.

Ag Resource dismisses the U.S. concerns as "premature," noting that farmers won't start planting until early April and that warmer weather and rain can "melt the existing snow in a matter of days." But Farm Futures said in a commentary that the discussion of flooding is a reminder that there is still a lot of corn from the 2009 crop remaining in the fields in the Dakotas.

Traders say there is a lack of pressing fundamental news to move the market currently, but that soon the market will begin to focus on March 10 reports from the U.S. Department of Agriculture, which will release new supply and demand estimates and possible revisions to the 2009 crop. Analysts say that most market participants are expecting the USDA to revise the crop estimate slightly lower.

The next downside price objective for the bears is to push and close prices below solid technical support at the February low of US$3.59 a bushel, a technical analyst said. The bulls' next upside price objective is to push and close prices above major psychological resistance at US$4.00 a bushel.

First resistance for May corn is seen at Monday's high of US$3.87 3/4 and then at US$3.90. First support is seen at US$3.80 and then at US$3.75.