April 18, 2008

 

CBOT Corn Outlook on Friday: Down 4-6 cents on dollar rally, speculative sales

 

 

U.S. corn futures are expected to open four to six cents lower Friday on follow-through from weak overnight prices and a rally in the U.S. dollar, which is leading to speculative selling and profit-taking in many commodity markets, analysts said.

 

Nearby May corn overnight lost 6 cents to US$5.97 1/2, July was down 6 cents to US$6.11 and new-crop December lost 5 cents to US$6.21 a bushel.

 

"The outside markets are leading us lower here this morning, and we expect to see a little profit-taking ahead of the weekend," one analyst said.

 

The dollar is rallying against the world's major currencies, and speculative fund selling is being seen in the key energy and precious metals markets, which is expected to have a bearish effect in the grain pits as well, he said.

 

In addition, some of the early forecasts suggested fewer rains and less cold weather for the corn belt, which may have encouraged some of the overnight sales, a trader said.

 

On Thursday, showers and thunderstorms moved through southeast Nebraska, much of Iowa and north-northwest Missouri, bringing rains of 0.30-1.50 inches and locally heavier amounts. In the central and eastern belt, rains were confined mostly to southwestern Wisconsin extreme northwestern Illinois.

 

A line of showers Friday morning runs from Wisconsin down through eastern Iowa and western Illinois, Missouri, Arkansas down into Louisiana and the coastal area of Texas. The rains are expected to keep fields too soggy for Midwestern farmers to plant, and the heaviest rains from 0.50-1.50 inches are predicted for Illinois and Wisconsin.

 

The longer range charts suggest more wet weather may develop next week, with cool conditions possible at week's end or during the weekend, which means fieldwork delays will likely continue, said private forecaster DTN Meteorlogix.

 

In other news, South Korea said Friday it would open its markets to U.S. beef of all ages, which may be friendly for corn since it would likely improve the bottom-line for cattle feeders, another analyst said.

 

Chinese corn futures were steady overnight in mostly quiet trade. The Chinese government on Thursday imposed a special 100% tariff on phosphate and urea fertilizers in an effort to secure domestic supplies as farmers there ramp up production to feed increasing numbers of livestock as well as for human consumption.

 

The move raises the total export tax to 130%-135% for the most widely exporter fertilizer products and is expected to further tighten the supply/demand situation for global fertilizer.

 

Technically, bulls still have a near-term advantage in July corn, with their next upside objective to close above resistance at the contract and all-time high of US$6.28 1/4 a bushel, an analyst said. For bears, the next objective is to close below solid support at last week's low of US$5.96 3/4.

 

First resistance is put at US$6.22 3/4, then US$6.28 1/4, while support is uncovered at US$6.12 and then at US$6.07 a bushel, he said.