June 2, 2009

 

CBOT Corn Outlook on Tuesday: Lower; profit-taking after Monday rally

 

 

Chicago Board of Trade corn futures are expected to open lower Tuesday as traders take profits following Monday's gains, traders said.

 

Corn is called 2 to 4 cents lower. In overnight trading, July corn was down 4 1/4 cents to US$4.41 1/2 per bushel and December corn was down 4 1/2 cents to US$4.64 3/4.

 

The market surged to its highest level in almost five months Monday, due mostly to bullish support from crude oil and equities, plus a weaker dollar. Profit-taking should follow in a "turnaround Tuesday," but analysts say that outside markets could continue to set corn's direction.

 

Crop concerns and lingering wet weather continue to underpin the market, traders said.

 

U.S. corn planting was 93% complete as of Sunday, down from 94% last year and the average of 97%, the U.S. Department of Agriculture said Monday. The planting progress was within trade estimates, which ranged from 90% to 95% complete. A week ago, 82% of the crop was planted.

 

"The crop is late by historical standards, but it is at least in the ground, with 93% planted by this past weekend compared to 94% last year and 97% as the five year average," Dennis Gartman wrote in The Gartman Letter Tuesday.

 

But Western Milling analyst Joel Karlin noted in a weekly newsletter than while late corn and soy plantings do not guarantee below trend yields, "it certainly puts the crops behind the eight ball, which is not needed given talk that even with decent conditions here on out next year's domestic corn stockpile will fall below 1.0 billion bushels."

 

In its first crop condition rating of the year, the USDA said 70% of U.S. corn is in good-to-excellent shape. That was toward the high end of trade expectations. A year ago, 63% of the crop was rated good to excellent.

 

Weather forecasts call for scattered showers and thundershowers in the northern half of the Midwest Tuesday, with scattered showers and thunderstorms in central and southern areas on Wednesday. Another rain system is expected on the weekend into early next week.

 

The rain is seen as beneficial for the crop that has been planted. But it increases the potential for farmers who haven't planted their corn to switch to soybeans instead.

 

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, a technical analyst said. The next downside price objective for the bears is to push and close prices below solid technical support at last week's low of US$4.21 3/4 a bushel.

 

First resistance for July corn is seen at Monday's high of US$4.45 3/4 and then at US$4.49 1/4. First support is seen at US$4.40 and then at Monday's low of US$4.34 1/4.