March 16, 2010

 

CBOT Corn Outlook on Tuesday: Up 1 cent on short-covering, outside markets

 

 

Chicago Board of Trade corn futures are poised to open steady to slightly better Tuesday, with short-covering and mild support from outside markets keeping prices firm.

 

Corn is called flat to 1 cent higher. Overnight, May corn was up 1/2 cent to US$3.63 3/4 per bushel and July corn was up 1/4 cent to US$3.74 1/2.

 

The May contract has ended lower eight straight days, but is seen by some as technically oversold and due for some short-covering. A slightly weaker dollar and strong crude oil could give the market a little strength Tuesday.

 

The market is getting scant direction from fundamentals, analysts say, and volume has been low as traders await fresh news. The May contract has traded within a 10-cent range since Wednesday.

 

Underlying the market are concerns about spring planting. While analysts note differing forecasts for the rest of March in the U.S. Midwest, soil conditions seem likely to remain wet, delaying fieldwork and possibly planting.

 

"While farmers remain itching to get back into the field, it's likely just a bit too early to talk about weather in the corn market," Farm Futures senior editor Bryce Knorr said in a market commentary. "Still, planting continues to lag in Texas, with just 11% of the crop planted, compared to 28% on average."

 

Traders also note that weather forecasts for South America are favorable for harvest, which is bearish for prices.

 

Technical analyst Jim Wyckoff said that the market has had a recent "collapse in volatility" that suggests a bigger price move is on the horizon.

 

The next downside price objective for the bears is to push and close prices below "very strong" technical support at the February low of US$3.59, Wyckoff said. Bulls' next upside price objective is to push and close prices above solid technical resistance at US$3.75 a bushel.

 

First resistance for May corn is seen at Monday's high of US$3.66 1/4 and then at US$3.70 3/4, Wyckoff said. First support is seen at Monday's low of US$3.62 and then at US$3.59.

 

A floor trader said that a dip below US$3.59 would be the lowest price since October, while a rally above US$3.69 1/2 would indicate a "short-term technical bottom is in place."