April 14, 2008

 

CBOT Corn Outlook on Monday: Up 3-6 cents on speculative strength, forecasts

 

 

Chicago Board of Trade corn futures are expected to open 3 to 6 cents a bushel higher on spillover from gains in soybeans and wheat and on continued uncertainty in the Midwestern weather forecasts, analysts said Monday.

 

In overnight trade, May corn was up 2 cents at US$5.86 1/4, July was up 2 cents at US$5.99 1/2 and December gained 6 1/4 cents to US$6.10 1/2 a bushel.

 

While corn is expected to receive support from strength in the CBOT grain pits, a weak U.S. dollar and speculative buying in key inflationary markets such as crude oil and precious metals, traders will also key on the possibility of additional cool, wet weather leading to planting delays, though temperatures will begin to rise.

 

"A cold start to the week will slow drying from recent rains, but temperatures will soon warm up over most of the corn CBOT," said Bryce Knorr, senior editor at Farm Futures.

 

But after a relatively weak system moves across the Midwest this week, forecast models begin to diverge.

 

"If the wetter American model prevails, producers could have to contend with a regular series of storms over the next two weeks, making it difficult overall to get fieldwork done," Knorr said.

 

The western Midwest will be mostly dry Monday and Tuesday, with a chance for light showers later Wednesday, private forecaster DTN Meteorlogix said. Showers may be seen Wednesday night, Thursday and Friday from eastern and southern Iowa into Missouri, with amounts of 0.25-1.00 inch and locally heavier amounts possible.

 

In the east, conditions will be mostly dry Monday through Wednesday, with a chance for showers in northwestern and far western areas on Thursday. Light to moderate showers and thundershowers are possible Friday and Saturday, bringing 0.25-1.00 inch of rain. The heaviest rains are expected to occur in central and southern Illinois, southern Indiana and Kentucky, Meteorlogix said.

 

The six- to 10-day outlook falls for near- to above-normal temperatures, with near- to above-normal rains in the western corn belt and near to below normal in the east.

 

While rains in the forecast are enough to keep planting-delay concerns alive, traders are aware that farmers can get a lot of ground planted in a hurry. Any extended breaks in the forecast are expected to encourage sales, according to Knorr.

 

In other news, the U.S. Agriculture Department said Monday that 50,000 tonnes of corn were sold to South Korea for the 2007-08 marketing year, and another 50,000 tonnes were sold for 2008-09.

 

In addition, 116,000 tonnes of corn were sold to unknown destinations for 2007-08, the USDA said.

 

China's corn planted area was estimated at 27.4 million hectares in 2008, down 2.3% from last year. However, production may rise 0.7% from last year to 149 million metric tonnes because of a 3.1% yield increase to 5,438 kilograms per hectare, the China National Grain and Oils Information Center said.

 

Large funds increased longs by 27,746 contracts in corn futures and options in the week to April 8, taking their net-long position to 177,194, from 146,577 contracts the previous week, the Commitments of Traders report showed. Funds also reduced shorts by 2,871 lots. As a percent of open interest, funds were 8.1% net-long, up from 6.8% last week.

 

Despite CBOT July corn putting in a bearish weekly low close on Friday, bulls still hold a technical advantage, though it is slipping. The bulls' next upside objective is resistance at the contract high of US$6.28 1/4, while the bears' downside objective is pushing prices down to US$5.91, an analyst said.

 

First resistance on July corn is pegged at US$6.00 and then Friday's high of US$6.07 1/2. Support is placed at US$5.91, with another layer at US$5.85 a bushel, he said.