March 20, 2008

 

CBOT Corn Outlook on Thursday: Sharply down; fund liquidation to continue

 

 

Corn futures on the Chicago Board of Trade are expected start Thursday's day session on the defensive, plunging on the continuation of speculative fund long liquidation pressure.

 

Analysts expect corn to open 20 cents lower.

 

In overnight electronic trading, May corn was 19 1/4 cents lower at US$5.08, July corn was 20 cents lower at US$5.19 1/4, and December corn was 20 cents lower at US$5.21 1/4.

 

Speculative fund liquidation was the dominant force directing prices overnight, with broad based selling expected to continue across the commodity asset class amid a slowing global economy, analysts said.

 

Outside market influences are pointing to lower price action, with technical weakness and talk of slowing demand providing pressure to weigh on prices as well, analysts added.

 

Crude oil futures are down more than US$3.00 a barrel, with the May futures below the US$100 a barrel level. Gold futures are down over US$25 an ounce in early action. The U.S. dollar index is higher.

 

However, traders continue to look for signs of downside exhaustion, with supportive longer term fundamentals and concerns over Midwest rains delaying early fieldwork seen providing underlying support, analysts added.

 

Meanwhile, traders say position evening and short covering may generate some support heading into an extended holiday weekend, providing an opportunity for futures to trade off limit down levels during the session, a CBOT floor analyst said.

 

CBOT markets will be closed Friday in observance of the Good Friday holiday.

 

A technical analyst said Wednesday fresh four-week low close produced some near-term chart damage. More serious chart damage would occur on strong follow-through selling pressure and a bearish weekly low close on Thursday.

 

The next upside price objective for July corn is to push and close prices above solid technical resistance at US$5.50. The next downside price objective is to push and close prices below solid support at US$5.25. First resistance for July corn is seen at Wednesday's high of US$5.47 and then at US$5.50. First support is seen at US$5.35 and then at US$5.30.

 

U.S. Department of Agriculture reported total weekly corn export sales were 780,700 metric tonnes for the week ended March 13. 2007-08 marketing year sales totaled 749,500 tonnes. The sales were primarily for Japan with 399,700 metric tonnes, and Mexico with 107,400 tonnes. Analysts had forecast sales between 550,000 and 800,000 metric tonnes.

 

In other news, South Korea on Thursday announced an emergency decision to lift import tariffs on 70 price-sensitive products including wheat and corn to help tame rising inflation. The decision was made at a meeting of economic ministers chaired by President Lee Myung-Bak, the presidential office said.