February 27, 2007

 

CBOT Corn Outlook on Tuesday: Down 2-4 cents on follow through tech sales

 

 

Corn futures on the Chicago Board of Trade are seen starting Tuesday's day session lower, pressured by follow through technical selling from Monday's close and the bearish influence of weakness in outside markets.

 

Analysts expect corn to open 2 to 4 cents lower.

 

In overnight electronic trading, March corn ended 3 3/4 cents lower at US$4.21 3/4, May corn finished 4 cents lower at US$4.34 1/2, and December corn was 2 1/2 cents lower at US$4.15 1/2.

 

The market is expected to take its cue from overnight trade, with carryover weakness from Monday's poor technical close applying early pressure, analysts said.

 

End-of-the-month profit taking and pre-first notice day positioning have futures poised for a weaker start, with declines in metals and energy futures seen attracting fund related sales to aide the defensive tone, a CBOT floor analyst said.

 

Otherwise, a quiet news front is expected to keep technical objectives in play, with lingering concerns over whether the current wet pattern in the Midwest will linger into the planting season provides some uncertainty to underpin prices, traders said. Nevertheless, position squaring may remain a feature as traders remain on guard for any potential surprises that may emerge from this week's U.S. Department of Agriculture annual outlook conference.

 

A technical analyst said good follow-through selling pressure Tuesday will produce a bearish key reversal down on the daily bar chart and would be one early technical clue that a near-term top is in place. However, market bulls still have solid upside technical momentum in the corn market, he said.

 

The next major upside technical price objective is to produce a close above solid chart resistance at US$4.50 basis May futures. The next downside price objective is producing a close below solid chart support at 4.30.

 

First resistance for May corn is seen at US$4.40 and then at US$4.45. First support is seen at Monday's low of US$4.38 and then at US$4.35.

 

The DTN Meteorlogix Weather Service forecast said the US and European models are in fair to good agreement during the next 5-7 days, and fair agreement during days 8-10. Significant precipitation and cold weather is on tap for the Midwest region within the 5 to 7 day period. After that it should be drier and warmer, especially in western areas.

 

In the western Midwest, snow, ice and rain redevelops Wednesday and continues Thursday. This will likely mean further transportation delays. In the eastern Midwest, the Illinois River will see mostly rain from this next system, although northern areas may see snow or ice for a time at the start, Meteorlogix reports.

 

U.S. Midwest cash corn basis bids were mostly steady Tuesday, cash traders said. Spot U.S. cash corn bids were up 3 cents in Cedar Rapids, Iowa, down 2 cents in Peoria, Ill., and up 1-cent in St. Louis, Mo.

 

In overseas markets, corn futures traded on China's Dalian Commodity Exchange settled mostly lower, with the benchmark September corn contract settling RMB9 lower at RMB1,719/tonne.