May 22, 2008

 

CBOT Corn Outlook on Thursday: 1-3 cents higher on crude expectations

 

 

Chicago Board of Trade corn futures are expected to open 1 to 3 cents higher Thursday on expectations of a continued rally in crude oil, which has eclipsed weather as the market's key factor, traders said.

 

July corn was up 1 1/4 cents in overnight trading to US$6.08 1/2 per bushel, while September corn was up 1 3/4 cents to US$6.21 1/4 and December corn was up 1 cent to US$6.34 1/2.

 

Traders said corn will likely continue to rise as long as a rally in crude oil continues. Crude hit a new record overnight and eclipsed US$135 per barrel, but has since pared some of its gains.

 

"In terms of fundamentals, what else matters?" a trader said. "I think (weather) has really become a background issue in the short-term."

 

Despite the bullish support from oil, there could be some cautious traders headed into the long Memorial Day weekend, said Jerry Gidel, an analyst with North American Risk Management Services.

 

A couple traders said there could be downward pressure from growing concerns that the Commodity Futures Trading Commission will move to limit the role of speculators in the futures markets. They said such a move would take a long time to enact, however. Critics say the role of speculative funds has distorted futures prices.

 

But a report from Morgan Stanley cites increased demand as the driver of higher corn prices. In the report, Morgan Stanley increased its forecast for corn in the 2008-09 marketing year to US$7, up from US$6. It also increased its forecast for 2009-10 corn by a dollar, to US$8.

 

"We believe that prices will need to rise further from current levels in order to ration feed demand in light of continued ethanol demand growth, which we see as supported by rising gasoline prices," the report said.

 

The next upside price objective is to push July corn prices above solid technical resistance at US$6.15, a technical analyst said. The next downside price objective is to push and close prices below solid support at US$5.79 1/4.

 

First resistance for July corn is seen at Wednesday's high of US$6.08 3/4 and then at US$6.15. First support is seen at US$6.00 and then at US$5.95.