April 2, 2008

 

CBOT Corn Outlook on Wednesday: Up 3-5 cents on follow-through momentum

 

  

Corn futures at the Chicago Board of Trade are expected to open 3 to 5 cents a bushel higher Wednesday on continued bullish momentum, higher overnight prices and concerns that cool, wet weather may set back spring planting efforts, traders and analysts said.

 

Nearby CBOT May corn overnight gained 5 1/4 cents to US$5.89 1/4 and July rose 4 1/4 cents to US$6.02 1/4 a bushel. Both contracts scored new all-time highs of US$5.89 3/4 and US$6.02 1/2, respectively. New-crop December topped out at US$5.98 but remained just below the all-time high of US$6.02 a bushel.

 

The market continues to ride the wave of bullish fundamentals: strong demand for ethanol and livestock feed, 8% fewer acres expected to be planted this year versus last and adverse weather that threatens to delay early planting efforts.

 

"The smaller corn inventory says we are using current supplies a bit faster than expected, which means demand (especially feed demand) is very strong," an Iowa corn processor said. "When combined with the 86 million corn acreage projection, you end up with a skinny to non-existent corn carryout on Sept. 1, 2009."

 

While a firmer open is expected in corn, soybeans are expected to open 5 to 10 cents lower, which may exert pressure in the corn market. A slightly firmer U.S. dollar and early weakness in key markets such as crude oil may also encourage selling in the grain pits or possibly serve to limit any gains.

 

But all eyes are on the weather forecasts, which suggest more cool, soggy conditions in store for already wet areas of the eastern and southern Midwest and the Delta, DTN Meteorlogix said.

 

In the western corn belt, light to moderate precipitation is possible through southern Iowa and northern Missouri on Thursday, with heavier rains likely through southern Missouri.

 

The eastern belt will see light rain develop in southern areas early Thursday, with chances for heavier rain and thunderstorms in southern and eastern locations late Thursday and early Friday.

 

The six- to 10-day outlook still calls for near to below-normal temperatures and above-normal precipitation, Meteorlogix said.

 

Technically, the uptrend in May corn continues, as prices trade solidly above the key moving averages and to all-time highs. As of yet, there are no indications that the market is approaching a top, one analyst said.

 

May corn's relative strength index did reach 67 on Tuesday, and is closing in on the 70 area where markets are normally considered overbought, though the bullish fundamentals of the market may override the near-term technical indicators, another analyst said.