May 15, 2009

 

CBOT Corn Outlook on Friday: Steady-up slightly amid crop concerns

 

 

Chicago Board of Trade corn futures are expected to open steady to slightly higher Friday as the trade takes a cautious approach ahead of the weekend due to weather uncertainty.

 

Corn is called steady to 2 cents higher. In overnight trading, July corn was up 1/2 cent to US$4.28 3/4 per bushel and December corn was up 1/2 cent to US$4.49.

 

The state of the crop is front-and-center in the market, traders and analysts said.

 

"It's a weather market in corn," a trader said. "You're at some very important (planting) dates."

 

Agronomists say the calendar is starting to move beyond the optimal planting window for corn in the heart of the corn belt. The crop is likely to lose yield potential each day it isn't planted, although many analysts say that as long as it's planted by the end of the month, the crop could still end up being very strong.

 

There are mixed views of the weather, with near-term bullish rainfall countered by forecasts calling for drier weather next week.

 

The DTN Meteorlogix forecast says that "a new round of heavy rains today and tonight will likely further delay field work and planting." Drier weather will follow, but agronomists say it will take several days of dry weather before farmers in parts of Illinois and Indiana can get into the fields.

 

Drying could also be limited by average or below-normal temperatures, some analysts add.

 

Because of the potential for the weather forecast to change between Friday and Monday, traders will likely be cautious Friday, analysts said. Country Hedging said in a morning commentary that mid-day weather forecast updates will likely dictate the market's direction headed into the close.

 

Strength in the soybean market could help underpin corn, a trader said. Traders and analysts note that open interest has soared this week due to a combination of fund selling and farmer hedging.

 

The market needs to continue to be fed with bullish news to encourage the new longs, a trader said.

 

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

 

First resistance for July corn is seen at US$4.30 and then at this week's high of US$4.34, the technical analyst said. First support is seen at US$4.25 and then at US$4.20.

 

In other news, China will move 3.05 million metric tonnes of corn from northeast producing areas to consumption areas to ease pressure on the capacity of state reserves, the State Administration of Grain said Friday.

 

The corn will be transferred to 11 provinces and three big cities, the administration said in a statement published on its Web site.

 

Analysts said the government has bought around 35 million tonnes of domestic corn from last year's harvest, 88% of the 40 million tonnes it plans to buy.