March 23, 2009

 

CBOT Corn Outlook on Monday: Up 5-7 cents on technical strength, soy support

 

 

Chicago Board of Trade corn futures are expected to open 5 to 7 cents higher Monday following overnight gains on technical strength, inflation concerns and support from soybeans, analysts said.

 

In overnight trading, May corn was up 7 cents to US$4.03 1/2 per bushel, July corn was up 6 3/4 cents to US$4.13 3/4 and December corn was up 6 3/4 cents to US$4.34 3/4.

 

Traders say that continued deterioration in relations between the Argentina government and farmers is providing support to soybeans, which are leading corn. Farmers on Friday launched a one-week strike Friday to protest export taxes on grains.

 

"I think you have to give the Argentina situation a lot of credit, because corn was the laggard overnight," a trader said of corn's gains. He said the trade was surprised by how quickly the situation in Argentina has deteriorated.

 

The May corn contract made a new high in overnight trading, he added, which should broaden ideas that the market is ready to move another leg higher, perhaps to the US$4.20 area. The US$4 area was strong resistance last week, as farmers took the opportunity to unload some grain before planting season.

 

Some traders say wet weather expected in the U.S. corn belt could cause early planting delays, although others say it's still too soon to worry about that.

 

Release of the U.S. Treasury Department's plan to buy up toxic bank assets was supporting equities, which should help gains in corn and other commodities, analysts said.

 

Concerns over inflation will also continue to support the market, analysts said.

 

"The weak dollar is of course at the base of (commodities') strength, and until it is clear that the U.S. dollar is going to strengthen, we have to believe that the commodity markets are strong and shall remain so for some while yet," Dennis Gartman said in this morning's Gartman Letter.

 

Speculative funds are net long in corn for the first time in five months. They added 4,962 contracts to their CBOT corn long positions and cut 30,767 contracts from their short positions, putting them net long 11,637 contracts, the Commodity Futures Trading Commission said Friday. It is the first time traditional speculative funds have been net long in corn since the Oct. 17 report.

 

The supplemental commitment of traders report also showed commercial funds added 5,119 contracts to their long positions and 42,440 contracts to their short positions, putting them net short 166,050 contracts.

 

Index funds added 5,914 contracts to their long positions and added 4,436 contracts to their short positions, putting them net long 226,611 contracts, the CFTC said.

 

The next downside price objective is to push and close May prices below solid technical support at US$3.75 a bushel. The next upside price objective is to push and close prices above solid technical resistance at US$4.25.

 

First resistance for May corn is seen at US$4.00 and then at last week's high of US$4.02 1/2. First support is seen at Friday's low of US$3.93 1/2 and then at US$3.90.