March 17, 2010

 

CBOT Corn Outlook on Wednesday: Up 1-2 cents amid follow-through buying

 

 

Chicago Board of Trade corn futures are expected to open 1 cent to 2 cents higher Wednesday on follow-through buying after Tuesday's gains and supportive outside markets.

 

In overnight trade, May corn was up 1 1/2 cents to US$3.68 1/4 per bushel and July corn was up 1 3/4 cents to US$3.79 1/2.

 

After climbing Tuesday for the first time in nine trading days, analysts say there could be some follow-through Wednesday. Tuesday's climb came amid an increase in open interest of more than 6,000 contracts, which analysts said indicated there was new buying, not just short-covering. The market has strong technical support at US$3.59 in the May contract, analysts say, although the upside is also seen as limited.

 

Fundamentally there is little news, and traders are already looking ahead to the March 31 planting intentions and quarterly grain stocks reports from the U.S. Department of Agriculture.

 

A weaker dollar supported prices overnight, and it is mostly lower Wednesday morning.

 

Traders are watching weather forecasts as planting season approaches. Expected flooding in the upper Midwest is considered supportive to the market, as it could delay planting. Traders also note that because of wet conditions, many farmers across the Midwest didn't complete fieldwork last fall, which will make them more anxious this spring.

 

DTN Meteorlogix said in a forecast that drier weather through Thursday will allow for some drying of very wet fields, but added that the longer-range forecast "suggests a chance for heavier rain or rain changing to snow in the area" increasing the flood risk and possible fieldwork delays.

 

In export news, compound feed manufacturers in Japan have purchased two cargoes totaling 100,000 metric tonnes of corn over the past few days at around US$231 a metric tonne, cost and freight, for delivery from the U.S. Gulf region, trading executives said Wednesday.

 

No significant purchases of South American corn have yet been made this month, due to high freight costs and market talk that port workers in Argentina may go on strike over wages, traders in Japan said.

 

In other news, agricultural commodity prices have limited upside as abundant supplies are expected to cap gains, with the exception of corn, Goldman Sachs Group Inc. (GS) said Wednesday.

 

According to the bank, corn futures prices are expected to steadily increase throughout 2010.

 

"We maintain our three-month, six-month and 12-month Chicago Board of Trade corn [futures] price forecasts of US$4.00 a bushel, US$4.50 a bushel and US$4.75 a bushel, respectively, driven by our expectations of tighter fundamentals and our constructive views on oil," said the bank.

 

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, a technical analyst 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 Tuesday's high of US$3.69 and then at US$3.70 3/4. First support is seen at Tuesday's low of US$3.63 and then at US$3.59.