May 13, 2009

 

CBOT Corn Outlook on Wednesday: Up 4-6 cents on wet weather, technical strength

 

 

Chicago Board of Trade corn futures are expected to open higher Wednesday on a wet outlook for the eastern U.S. corn belt and technical strength, analysts said.

 

Corn is called 4 to 6 cents higher. In overnight trade, May corn was up 5 1/2 cents to US$4.25 per bushel, July corn was up 6 cents to US$4.33 1/2 and December corn was up 7 1/4 cents to US$4.55 1/4.

 

The market has momentum after Tuesday's gains, which took the market above its 200-day moving average. The gains came amid a surge in open interest and heavy volume, which analysts said was a bullish signal.

 

A catalyst for the move was the U.S. Department of Agriculture's supply and demand report, which increased demand for exports and ethanol, and projected 2009-10 ending stocks dropping to 1.145 billion bushels.

 

"It is the new crop that is interesting, for although a 1.142 billion bushel carry-out is not tight, it could swiftly become a good deal smaller if the current crop in the ground is curtailed even modestly," Dennis Gartman said in Wednesday's Gartman Letter.

 

Traders expect the crop will in fact be reduced, as farmers in Illinois and Indiana have barely started their planting. They said a weak crop could push new crop carryout below 1 billion bushels.

 

"Market bulls could be just a few weeks away from determining if extensive rationing has to be done or if the current levels are sufficient in the mid US$4.50 range on the December 2009 contract," Benson Quinn Commodities analyst Jon Michalscheck said in a market commentary.

 

WSI AgTrader says in a daily weather report that wet weather has redeveloped in the heart of the corn belt, which will see 1 to 2 inches, with heavier amounts, through Sunday. The rainfall coverage will be most consistent in the eastern corn belt, where planting delays are most severe.

 

But analysts note that longer-range forecasts appear to show a drier pattern. Some traders say that once the crop gets into the ground, even if it's late, that the market could come under pressure because of last-year's experience, in which a late-planted crop did not prevent a trend-line yield.

 

Also potentially keeping a lid on the market is farmer selling, which was a feature of Tuesday's market, a trader said.

 

Outside markets could limit upside movement, with the dollar higher and U.S. equities pointing lower Wednesday morning.

 

The next upside price objective is to push and close prices above solid technical resistance at the January high of US$4.49 1/4 a bushel. The next downside price objective for the bears is to push and close prices below solid technical support at US$4.00 a bushel.

 

First resistance for July corn is seen at Tuesday's high of US$4.31 3/4 and then at US$4.35. First support is seen at US$4.25 and then at Tuesday's low of US$4.20.