April 20, 2009

 

CBOT Corn Outlook on Monday: Down on follow-through, outside pressure

 

 

Chicago Board of Trade corn futures are expected to open lower Monday amid follow-through selling and pressure from outside markets, analysts said.

 

Corn is called 7 to 9 cents lower. In overnight trading, May corn was down 8 3/4 cents to US$3.67 1/2 per bushel, July corn was down 8 3/4 cents to US$3.77 and December corn was down 9 cents to US$3.98.

 

The market has moved lower recently as much on technical weakness as fundamentals, said Shawn McCambridge, senior grains analyst for Prudential Bache. But the market is close to being oversold.

 

He said the tone for Monday's trade will likely be set early, after the follow-through selling is exhausted and it becomes apparent whether new shorts will enter the market.

 

Traders and analysts say expectations of warmer, dry weather in the U.S. corn belt this week is bearish, as farmers should have the opportunity to get a lot of planting done. A floor trader said he expects slow progress to be reflected on the USDA's crop progress report Monday afternoon. The season has started slowly due to wet, chilly weather.

 

"It does look like the start of the season is going to get off to a slower start," McCamrbidge said. "But it is delayed by wet weather, so once the crop is planted its going to have plenty of moisture to support germination and early crop development."

 

A trader noted that equities and crude oil are also likely to add pressure Monday.

 

Concerns about ethanol demand are hanging over the market, analysts add. The trade is eyeing a decision expected this week in California that could include land-use changes in its assessment of corn ethanol's environmental impact. Such a decision would be seen as a bad sign for ethanol demand and have a psychological effect on the market, analysts said.

 

Speculators added 5,627 contracts to their CBOT corn long positions and added 8,400 contracts to their short positions, putting them net long 19,389 contracts, the Commodity Futures Trading Commission said Friday. The supplemental commitment of traders report also showed commercial funds cut 16,513 contracts from their long positions and cut 14,991 contracts from their short positions, putting them net short 186,303 contracts. Index funds added 408 contracts to their long positions and cut 2,414 contracts from their short positions, putting them net long 254,140 contracts, the CFTC said.

 

Bears have the near-term technical advantage and gained more downside momentum on Friday, a technical analyst said. The bulls' next upside price objective is to push and close prices above solid technical resistance at last week's high of US$4.08 1/2.

 

The next downside price objective for the bears is to push and close prices below solid technical support at US$3.75 a bushel, the technical analyst said.