May 28, 2008

 

CBOT Corn Outlook on Wednesday: 10-13 cents lower on crude, land announcement

 

 

Chicago Board of Trade corn futures are expected to open 10-13 cents lower Wednesday on overnight losses following a drop in crude oil and the government's announcement it will allow farmers to open up idle lands to cattle ranchers, traders said.

 

In overnight trading, July corn was down 13 cents to US$5.85 per bushel, September corn was down 13 cents to US$5.98 and December corn was down 13 1/4 cents to US$6.12 1/4.

 

The U.S. Department of Agriculture's announcement Tuesday will open up 24 million acres in the Conservation Reserve Program, and should reduce corn demand for feed, as cattle are able to graze instead.

 

"It will relax what has been pressure to move cattle into the feedlots," said John Kleist, a broker/analyst with Allendale in McHenry, Ill.

 

Weakness in crude oil and a stronger dollar also caused overnight losses and could depress prices Wednesday, traders and analysts said. A trader said he thinks the dollar is rebounding from a recent bottom, and that "the commodity basket is going to take a beating because of it."

 

Corn could also feel pressure from technical selling, traders said. July corn dipped below its 50-day moving average overnight, and Kleist noted that December corn is also approaching its 50-day average.

 

Analysts say corn prices should still get support from this season's late planting and behind-average emergence. They say there are reports of replanting in parts of the U.S. corn belt due to cold, wet weather, and that yields could suffer.

 

The USDA report showed crop plantings at 88%, up from 73% last week but below the five-year average of 94%.

 

Emergence was at 52%, up from 26% last week but behind the five-year average of 76%.

 

The next upside price objective is to push July prices above solid technical resistance at last week's high of US$6.11 1/4, 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 US$6.00 and then at Tuesday's high of US$6.07, the analyst said. First support is seen at Tuesday's low of US$5.92 1/2 and then at US$5.90.