April 27, 2009

 

CBOT Corn Outlook on Monday: Down 10-15 cents on swine flu, feed concerns

 

 

Chicago Board of Trade corn futures are expected to open 10 cents to 15 cents lower Monday as the swine flu outbreak, and speculation about its implication for feed demand, weighs on prices.

 

In overnight trade, May corn was down 14 1/4 cents to US$3.62 3/4 per bushel, July corn was down 14 1/4 cents to US$3.71 1/2 and December corn was down 14 3/4 cents to US$3.80 1/2.

 

News of the swine flu outbreak over the weekend is battering a swath of markets.

 

"The knee-jerk reaction is going to be to push these prices sharply lower then reassess the situation once prices start to settle a little bit," said Shawn McCambridge, senior grains analyst with Prudential Bache.

 

He noted that a few countries have already banned U.S. and Mexican pork imports. This has prompted worries that feed demand will suffer. Not only would reduced U.S. pork demand affect feed demand, a drop in Mexico's pork production would also hurt because that nation imports most if not all of its corn for feed from the U.S., McCambridge said.

 

Weakness in outside markets, including equities and crude oil, stemming from the outbreak will also pressure corn, analysts said.

 

Planting season is in full swing, and the trade is eyeing weather forecasts and the planting pace.

 

Traders said that the U.S. Department of Agriculture's crop progress report, to be released after the market closes Monday, could be significant. Trade estimates for corn planting vary widely, from under 15% to as high as 25%.

 

DTN Meteorlogix said that rain and strong storms in the western and northern areas of the U.S. Midwest "likely caused local flooding" and planting delays. More rain is likely this week, according to the forecast.

 

The western corn belt saw good progress last week, analysts said. McCambridge noted that the heaviest rain over the weekend fell mainly in the northern corn belt, which likely allowed for progress in other areas.

 

"That eases up a little bit of the concern but it's still not going to go away because we're awfully wet," he said.

 

Speculative funds turned net short during the week ended April 21, the Commodity Futures Trading Commission said Friday. Speculators cut 7,436 contracts from their long positions and added 40,518 contracts to their short positions, putting them net short 28,565 contracts.

 

The supplemental commitment of traders report also showed that commercial funds added 4,933 contracts to their long positions and cut 46,733 contracts from their short positions, putting them net short 134,597 contracts. Index funds added 7,776 contracts to their long positions and added 4,189 contracts to their short positions, putting them net long 257,727 contracts, the CFTC said.

 

The next upside price objective is to push and close July prices above solid technical and psychological resistance at US$4.00 a bushel, a technical analyst said. The next downside price objective for the bears is to push and close prices below solid technical support at last week's low of US$3.70 a bushel.