March 8, 2010

 

CBOT Corn Outlook on Monday: Up slightly, rangebound ahead of report

 

 

Chicago Board of Trade corn futures are expected to open slightly higher Monday thanks to supportive outside markets and the possibility of a messy start to spring planting.

 

Corn is called steady to 1 cent higher. In overnight trade, March corn was up 3/4 cent to USUS$3.65 1/2 per bushel and May corn was up 1/2 cent to USUS$3.76.

 

After setting the low for the week on Friday's close, the market bounced slightly overnight as a weaker dollar and stronger crude oil offered support.

 

The market is seen as remaining rangebound as traders await Wednesday's supply and demand report from the U.S. Department of Agriculture. Analysts generally expect the USDA to lower its 2009 U.S. crop estimate, although most also see a reduction in demand, which would leave projected ending stocks unchanged.

 

Uncertainty about the possibility of a crop revision will keep the market from drifting too far lower, analysts say.

 

Also underpinning the market is warmer, wet weather in the Midwest, which could cause flooding and delay fieldwork in some areas, analysts said.

 

"Corn harvest in Argentina has gotten off to a slow start with soggy fields and roads causing transportation difficulties," Country Hedging said in a morning commentary. "However, crops are in good shape and yields have been high."

 

Demand for U.S. corn has been seen as unspectacular by most traders. But Japan has booked around 200,000 metric tonnes of corn in the past few days from the U.S. due to high freight costs from Brazil and Argentina, trading executives said Monday.

 

There haven't been any significant purchases from South America for the last two weeks because the freight rates have gone up, said one executive at a global trading company.

 

He said freight costs from South America are usually around USUS$10/tonne higher than for corn purchased from the U.S., but since last week, they've increased and are close to USUS$17 to USUS$20 higher than U.S.-origin corn cargoes.

 

Managed money accounts sharply cut their CBOT corn short positions in the week ended March 2, the Commodity Futures Trading Commission said Friday. A disaggregated commitments of traders report showed managed money cutting 19,389 contracts from their short positions, leaving a total of 101,149, and adding 4,485 contracts to their long positions, for a total of 189,891. Prices had climbed modestly during that period, but have since retreated. A trader noted the report is a lagging indicator.

 

The next downside price objective for the bears is to push and close prices below solid technical support at USUS$3.65 a bushel, a technical analyst said. The next upside price objective is to push and close prices above solid technical resistance at last week's high of USUS$3.92 a bushel.

 

First resistance for May corn is seen at USUS$3.80 and then at USUS$3.85, the technical analyst said. First support is seen at Friday's low of USUS$3.75 and then at USUS$3.71.