March 24, 2010

CBOT Corn Outlook on Wednesday: Lower on dollar; bearish chart pattern

Chicago Board of Trade corn futures are expected to open lower Wednesday on technical pressure and a surging dollar that is weighing on commodities generally.

Corn is called 2 cents to 3 cents lower. In overnight trade, May corn is down 2 3/4 cents to US$3.60 per bushel and July corn is down 2 1/2 cents to US$3.71 1/4.

The dollar, which has rallied due to problems in Europe that have hurt the Euro, is the main factor in the day's trade, traders said. Losses overnight likely would have been greater if not for the fact that nearby May corn already lost 8 cents on Wednesday, a trader said.

Still, the market is in a precarious situation technically, as it hovers above key support at the February low of US$3.59. A trader said that a dip below that mark would trigger more technical selling, although he added that "US$3.50 is always a point at which you'll find end-user buying."

The next downside price objective for the bears is to push and close May prices below solid technical support at US$3.59, a technical analyst said, as a close below that level would produce serious chart damage and would also suggest a fresh leg down in prices. Bulls' next upside price objective is to push and close prices above solid technical resistance at last week's high of US$3.76 1/2 a bushel.

Fundamentally there has been little news, traders said, although they noted that warmer weather forecast for next week in the Midwest has been a bearish influence this week, as it eases concerns about planting delays.

Traders are looking ahead to the March 31 planting intentions and quarterly grain stocks reports from the U.S. Department of Agriculture. Farm Futures senior editor Bryce Knorr said in a commentary that "traders' normal caution ahead of major reports is evaporating in the face of bearish chart patterns."

Large South American crops remain a bearish background factor in the market. The Rosario Grain Exchange increased its forecast for 2009-10 corn production to 20.4 million metric tonnes Tuesday, up from the 19.7 million tonnes previously forecast.

Yields in Santa Fe, Cordoba and Buenos Aires province were higher than initially expected, increasing production prospects, the exchange said.