March 12, 2010

 

CBOT Corn Outlook on Friday: Seen up on weak dollar, lack of sellers

 

 

Supportive signals from outside markets and an absence of sellers are expected to nudge Chicago Board of Trade corn futures higher early Friday.

 

CBOT May corn is called to open 1 cent to 3 cents per bushel higher. In overnight electronic trading, the contract rose 2 cents, or 0.5%, to US$3.67 1/4.

 

Corn looks ready to open stronger because it seems "sellers are starting to get a little bit tired," said Bryce Knorr, analyst at Farm Futures. Since the beginning of the month, the May contract month has lost 23 3/4 cents, or 6%.

 

A selloff in the U.S. dollar and strength in crude oil should help lift corn, traders said. A soft dollar is often perceived as bullish because of ideas it makes U.S. grain more attractive to foreign buyers and increases investors' appetite for risk. Corn is linked to crude oil because ethanol is made from corn and funds often trade in a basket of commodities.

 

"With little direct news in corn today, outside markets could continue to buffet movements," Knorr said.

 

There continue to be concerns that wetness in the U.S. Midwest could delay corn planting in the spring. That will "keep the markets cautious as we move into the middle of March," according to a note from Country Hedging.

 

An "active weather pattern" in the Midwest next week looks to increase concerns about potential delays because of wet fields or flooding caused by above average rains combined with snow melt, private weather firm DTN Meteorlogix said. Producers can plant other crops, such as soybeans, if they are unable to seed corn in a timely manner.

 

Traders are starting to look ahead to the U.S. Department of Agriculture's March 31 prospective plantings report, which will include an estimate on corn acreage. The trade is expecting a 3 million to 4 million acre increase, with farmers planting 89 million to 90 million acres, said Tomm Pfitzenmaier, analyst for Summit Commodity Brokerage.

 

The corn market has moved lower during April in each of the past 15 years, including "all of the years when we were concerned about late planting," Pfitzenmaier said. That shows late planting concerns make for "very shallow rallies," he said.

 

The next downside price objective for the bears is to push and close May corn below solid technical support at the February low of US$3.59, a technical analyst said. Bulls' next upside price objective is to push and close the contract above solid technical resistance at US$3.80, he said.

 

First resistance is seen at Thursday's high of US$3.68 and then at US$3.70 3/4. First support is seen at Thursday's low of US$3.61 1/2 and then at US$3.59, the technical analyst said.