February 28, 2007

 

CBOT Corn Outlook on Wednesday: Up 3-5 cents; technical recovery from Tuesday

 

 

Chicago Board of Trade corn futures are poised for a higher start to Wednesday's day session, in line with overnight trade, as the market attempts to recover from Tuesday's sharp declines.

 

Analysts expect corn to open 3 to 5 cents higher.

 

In overnight electronic trading, March corn ended 5 cents higher at US$4.16, May corn finished 3 1/4 cents higher at US$4.27 1/2, and December corn was 4 1/2 cents higher at US$4.14.

 

The market is set for a technical recovery from Tuesday's meltdown, with stability in China's equity markets overnight seen providing some price support, analysts said.

 

However, traders will remain on guard for price weakness to emerge, as early morning losses in metals and energy futures may take some of the edge off prices, analysts added.

 

The market will remain jittery in the absence of fresh fundamental news and with speculative funds only selling a small portion of their huge length in the market Tuesday, downside risks remain if follow through buying does not surface, a CBOT floor broker said.

 

A technical analyst said Tuesday's price action confirmed a bearish key reversal down pattern on the daily bar chart, which is one early technical clue that a market top is in place. The next major upside technical price objective market bulls is to produce a close above solid chart resistance at US$4.50 basis May futures. The next downside price objective is to produce a close below solid chart support at Tuesday's low of 4.20.

 

First resistance for March corn is seen at US$4.30 and then at Tuesday's high of US$4.32. First support is seen at Tuesday's low of US$4.20 and then at US$4.15.

 

In deliveries, a total of 373 notices were reported on first notice day for the March future. The last trade date assigned was Nov. 6. A customer account at JP Morgan was the primary issuer of 366 lots, with a customer account at LBS Division the principle stopper of 284 lots. Analysts expected deliveries against the CBOT March corn contract to fall in a range of zero to upwards of 1,500 lots, with many analysts leaning toward a figure in the 500- to 1,000-lot range.

 

In demand news, South Korea's Major Feedmill Group, or MFG, is seeking to buy a total 330,000 metric tonnes of optional-origin and U.S. corn in a tender which may be concluded over the next few days, a trader in Seoul said Wednesday.

 

Meanwhile, sowing of Mexico's 2006-07 fall-winter harvest of white corn in the key grains state of northern Sinaloa is up 23% on the year-ago harvest, a leading corn producer Association in Sinaloa said Tuesday.

 

The DTN Meteorlogix Weather Service forecast said the US and European models are in fair to good agreement today. One more significant upper level trough will move eastward across the US during the next 5-6 days. This feature will be preceded by stormy weather and followed by 2-3 cold days.

 

Snow, ice and rain redevelops Wednesday in the western Midwest and continues Thursday. This will likely mean further transportation delays. In the eastern Midwest, the Illinois river will see mostly rain from this system, although the precipitation may change briefly to snow before ending. Colder temperatures are on tap for a time behind this system but the long range forecast is much warmer again, Meteorlogix reports.

 

U.S. Midwest cash corn basis bids were mostly steady Wednesday, cash traders said. Spot U.S. cash corn bids were up 3 cents in Keokuk, IA., up 4 cents in Champaign, Ill and up 4 cents in St. Louis, MO.

 

In overseas markets, corn futures traded on China's Dalian Commodity Exchange settled lower, with the benchmark September corn contract settling RMB19 lower at RMB1,700/tonne.