March 3, 2010

 

CBOT Corn Outlook on Wednesday: Up slightly on dollar, planting worries

 

 

Chicago Board of Trade corn futures are expected to open slightly higher Wednesday following overnight gains amid support from a weaker dollar and concerns about spring planting.

 

Corn is called 1 cent to 2 cents higher. In overnight trade, March corn was up 1 1/2 cents to US$3.72 per bushel and May corn was up 1 3/4 cents to US$3.83 1/4.

 

Outside markets have set a supportive tone, in particular a weaker dollar. The market lacks its own strong fundamental direction currently, traders said, and could drift sideways heading into the March 10 supply-and-demand report from the U.S. Department of Agriculture, traders said.

 

Underpinning the market are concerns about spring planting, which have arisen thanks to the large snowpack that is going to dump several inches of moisture onto the soil once it melts. This could cause flooding and delay fieldwork, some analysts warn.

 

But traders also say that a warming trend on the way could be good for farmers and bearish for the market, allowing for snowmelt that will ultimately help the fields dry faster. Others say it is too soon to worry about weather anyway.

 

A trader added that warming weather could hurt short-term basis, as farmers who are sitting on suspect-quality corn are forced to unload it before it degrades further.

 

Demand is mostly seen as lackluster, and analysts note that South Korea has passed on a tender for corn due to high prices.

 

"There's plenty of competition on rallies, plenty of inventory to sell," a trader said.

 

Hanging above the market are key resistance levels, including the 50-day, 100-day and 200-day moving averages. The market was unable to pierce those resistance levels on its recent rally, which led to a retreat in prices Monday.

 

The next downside price objective for the bears is to push and close May prices below solid technical support at last week's low of US$3.71 1/4 a bushel. Bulls' next upside price objective is to push and close prices above solid technical resistance at this week's high of US$3.92 a bushel.

 

First resistance for May corn is seen at Tuesday's high of US$3.84 1/2 and then at US$3.87 3/4 and then at US$3.90. First support is seen at US$3.78 and then at Tuesday's low of US$3.76.