May 16, 2006

 

CBOT Corn Outlook on Tuesday: Down 1-2 cents on plantings, floor weakness

 

 

Corn futures are expected to open 1-2 cents a bushel lower Tuesday on planting progress that was more advanced than some traders and analysts had expected and as the floor gives back a portion of its recent rally.

 

In overnight e-cbot trade, July corn fell 1 cent to US$2.69 1/2 and September corn lost 1 1/2 cents to US$2.58 1/2.

 

Wheat and soybean futures are also seen opening lower, based on overnight price weakness.

 

U.S. farmers had planted 85% of the corn crop as of Sunday, shy of last year's 88% but at the top end of trade forecasts looking for 80%-85% seeded. This is expected to provide mild price pressure at the open, a trader said.

 

Forty-four percent of the crop was emerged, versus 39% last year and the 40% five-year average.

 

Market participants are also keeping an eye on the cool temperatures over the Midwest for the possibility of seed rot, but those concerns are expected to be minor now with forecasts for next week suggesting a warming trend.

 

Weather conditions are mixed over the Midwest. Mostly dry weather is found in the western corn belt, while periods of light rain and drizzle are seen in central and eastern areas, the DTN Meteorologix weather service said.

 

The western belt is expected to continue dry Tuesday and Wednesday, with a few light showers possible on Thursday and Friday. Temperatures are seen averaging below normal Tuesday and near to below normal through the weekend.

 

In the eastern belt, light rain and drizzle is seen Tuesday through Thursday, with dry conditions or a few light showers Friday through Sunday. Temperatures will average near to below normal through Thursday, with much-below-normal-readings over the weekend, Meteorlogix said.

 

Temperatures are expected to climb to near to above normal by next week, which will benefit the crop.

 

Meanwhile, corn futures on China's Dalian Commodity Exchange fell on long liquidation, with the benchmark January contract down RMB24 to RMB1,464 a tonne.

 

On Monday, CBOT July corn closed 1 3/4 cents higher at US$2.60 per bushel on solid fund buying that totaled about 12,000 contracts.

 

Technically, corn bulls have gained upside momentum. It will take a close back above resistance at Friday's US$2.62 high to provide bulls with better upside momentum. A close below support at US$2.50 would provide the bears with fresh near-term downside momentum, an analyst said.

 

First resistance for July corn is seen at US$2.62 and then at US$2.65. First support is seen at US$2.58 and then at US$2.55.

 

July corn's Relative Strength Index currently sits at 74, indicating an overbought market.