April 1, 2009

 

CBOT Corn Outlook on Wednesday: Down on profit-taking, resistance at US$4

 

 

Chicago Board of Trade corn futures are expected to open lower Wednesday on profit-taking following Tuesday's rally, with crude oil adding pressure.

 

In overnight trade, May corn was down 5 1/4 cents to US$3.99 1/2 per bushel, July corn was down 4 1/2 cents to US$4.10 1/4.

 

The overnight action was a setback following sharp gains Tuesday, which included a surge at the close. Tuesday's gains were due in part to end-of-month, end-of-quarter "dressing up" by funds, which bought an estimated 14,000 contracts on the day, analysts said.

 

"As the overnight showed, May corn still has its problems holding above US$4," said John Kleist, broker/analyst for Allendale in McHenry, Ill.

 

The market has failed to maintain gains above US$4 during the past month due to farmer selling, traders and analysts said.

 

Tuesday's planting intentions report from the U.S. Department of Agriculture was seen as supportive to grains and oilseeds in general because of an overall loss in acreage. It was particularly supportive to soybeans, which soared, helping drag corn higher. Soybeans are expected to open higher again Wednesday, limiting corn's losses.

 

With the report out of the way, the trade is now focusing more on U.S. corn belt weather, analysts said. Wet forecasts are supportive, some traders say, because it will delay early planting. Some analysts said it's still early to be too worried about a wet spring, but that such concerns are nonetheless part of the market.

 

"If that's what the broader market believes, you don't want to stand in the way," Kleist said.

 

Mike Zuzolo, senior analyst for Risk Management Commodities, said that Tuesday's quarterly grain stocks report, which put corn stocks "very near where they were last year," leaves "a nice cushion for some planting delays."

 

Outside markets are mixed, analysts said, but lower crude oil will weigh. Concerns about the economy are once again growing, analysts add, which is bearish for prices.

 

The next upside price objective is to push and close May prices above solid technical resistance at US$4.25, a technical analyst said. The next downside price objective for the bears is to push and close prices below solid technical support at this week's low of US$3.76 3/4 a bushel.

 

First resistance for May corn is seen at Tuesday's high of US$4.06 and then at US$4.10. Support is seen at US$4.00 and then at US$3.95.

 

In international markets, China's corn prices in the major producing areas were higher in the week to Wednesday, supported by the government's purchase, which resulted in tightening supply in the northeast.