April 28, 2009

 

CBOT Corn Outlook on Tuesday: Down slightly on planting progress

 

 

Chicago Board of Trade corn futures are expected to open slightly lower Tuesday on pressure from better-than-expected planting progress last week.

 

Corn is called 1 cent to 3 cents lower. In overnight trading, May corn was down 2 3/4 cents to US$3.69 1/2 per bushel and July corn was down 2 1/2 cents to US$3.78 1/4.

 

Although the trade has been talking about the rainy weather over the weekend and this week in the U.S. Corn Belt, Monday's crop progress report from the U.S. Department of Agriculture showed farmers made good progress in some areas last week, particularly in the western Corn Belt.

 

Overall the crop was 22% planted as of Sunday, up from 5% last week. Most traders had expected progress between 15% and 20%, although some estimates were as high as 25%.

 

The report "causes us to be very cautious because this on the whole was a negative number - pushing us above last year by 13% and within 6% of the 5-year average," Mike Zuzolo, senior analyst for Risk Management Commodities, said in a report.

 

Progress was particularly strong in Iowa, where 47% of the crop was planted, compared with the average of 25% and last year's progress of just 3%. Areas further east, however, continued to lag, including Illinois, Indiana and Ohio. Zuzolo and other analysts noted that more rainfall this week is expected to further delay planting in those areas.

 

But a trader said that conditions are not as bad as they were last year, when plantings were late but the crop still produced a strong yield.

 

"I think to make a real weather case, it's going to have to be a late summer issue," the trader said.

 

The trader said the market is rangebound, between US$3.70 on the low side in the July contract and US$4.20 on the upside. Corn would need a sharp break in soybeans to break below the range. Farmer selling makes a move above the range unlikely, he added.

 

Many markets will see a corrective bounce Tuesday following irrational selling Monday due to the swine flu outbreak, another trader said.

 

Outside markets, including equities, crude oil and the dollar, appear set to pressure corn, traders 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 and Monday's low of US$3.70 a bushel.

 

First resistance for July corn is seen at Monday's high of US$3.84 and then at US$3.90, the technical analyst said. First support is seen at US$3.75 and then at US$3.70.