March 15, 2010

 

CBOT Corn Outlook on Monday: Seen down slightly on firm US dollar

 

 

Strength in the U.S. dollar and perceptions that corn supplies are comfortable are expected to weigh on Chicago Board of Trade corn futures early Monday.

 

CBOT May corn is called to open 1 to 2 cents per bushel lower. In overnight electronic trading, it fell 1 1/2 cents, or 0.4%, to US$3.62 3/4.

 

Corn weakened overnight and is called to start lower along with neighboring CBOT soybeans and wheat. The stronger dollar is seen as bearish for the grains and soybeans because of perceptions it makes them less attractive to foreign buyers and reduces investors' appetite for risk.

 

"This morning we are looking for corn prices to a see continued weakness," Summit Commodity Brokerage said in a note. "The dollar is stronger and the crude oil market is weaker. Those factors, along with the weak closes last week, are likely to pressure corn on the open."

 

The market's fundamental storyline is not supportive because "there is plenty of corn and the demand for all of that corn is not very good right now," the firm said. The U.S. Department of Agriculture last week raised its estimate for 2009-10 U.S. corn, sending stocks to a four-year high of 1.799 billion bushels from its February estimate of 1.719 billion.

 

The estimate weighed on prices, and losses in corn last week inflicted near-term chart damage on the market, a technical analyst said. Bears have the near-term advantage, but the downside may be limited in the near term.

 

May corn is not far from a strong technical support level at US$3.59, the 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 for May corn is seen at Friday's high of US$3.67 1/4 and then at US$3.70 3/4. First support is seen at Friday's low of US$3.62 and then at US$3.59, the technical analyst said.

 

"Most of the technical indicators are pointing lower for corn, so it still looks like rallies need to be sold," Summit Commodity Brokerage said.

 

Traders continue to look ahead to the USDA's prospective plantings report, due out March 31, because it will give the government's first estimate on U.S. corn acres. The report remains a focus but a growing carryout lessens its impact because the country is building a reserve supply, an analyst said.

 

The market continues to watch weather forecasts amid lingering concerns about whether wetness will delay planting in the spring. The longer range forecast for the U.S. Midwest suggests "a wet early spring period, which increases the risk for field work delays due to muddy fields and possible river flooding," according to private weather firm DTN Meteorlogix.