April 30, 2009

 

CBOT Corn Outlook on Thursday: Up 2-3 cents on weather, technical strength

 

 

Chicago Board of Trade corn futures are expected to open higher Thursday on stormy Midwestern weather, another week of strong export sales and technical strength.

 

Corn is called 2 to 3 cents higher. In overnight trading, May corn was up 2 1/2 cents to US$3.95 1/2 per bushel, July corn was up 2 cents to US$4.03 1/4 and December corn was up 1 1/2 cents to US$4.23 1/4.

 

With consistent rainfall keeping farmers sidelined in the heart of planting season, weather is a dominant theme in the market, traders and analysts said. Rains have been falling across the corn belt this week and more is forecast, particularly for southern and eastern areas of the belt that are already delayed.

 

The rains are of particular concern because more farmers are now considering switching from corn to soybeans this season, analysts said. Allendale said in a morning commentary that there is still time for the eastern corn belt to get planted in the optimal corn planting window. But it added that "if next week's 14 day forecast is wet, then the bulls will have full reign on this market."

 

Strong export sales will add to the supportive tone. The U.S. Department of Agriculture reported sales of 1.346 million metric tonnes, up from 1.284 million last week. Trade estimates for the sales had ranged between 700,000 and 1.4 million tonnes.

 

Analysts added Thursday that South Korea has purchased 220,000 metric tonnes of U.S. corn.

 

There were 431 deliveries against the May futures contract Thursday on first notice day, at the lower end of expectations.

 

A floor trader noted that basis remained strong despite Wednesday's sharp climb, a sign that producers have not yet "turned on the faucet" and started unloading some of their grain.

 

The market has newfound technical strength, having shot above its 10-day, 20-day, 50-day and 100-day moving averages on Wednesday's climb. The move "soundly negated" a four-week-old downtrend on the daily bar chart, a technical analyst said.

 

A floor trader said the market nonetheless remains rangebound.

 

"You're testing the higher end of the trading range," he said. "But I'd still call it a range-trade."

 

The next upside price objective is to push and close July prices above solid technical resistance at the April high of US$4.17 1/2 a bushel, the 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 this week's low of US$3.70 a bushel.

 

First resistance for July corn is seen at Wednesday's high of US$4.02 1/2 and then at US$4.05, the technical analyst said. First support is seen at US$3.95 and then at US$3.90.