June 3, 2008

 

CBOT Corn Outlook on Tuesday: Down 3-4 cents on US crop progress, CFTC

 

 

Chicago Board of Trade corn futures are expected to open 3 to 4 cents lower on the U.S. government's crop progress report and concern about pending U.S. policy changes to address the role of speculators in commodities markets.

 

In overnight trading, July corn was down 3 3/4 cents to US$6.12 per bushel, September corn was down 4 3/4 cents to US$6.24 1/4 and December corn was down 4 cents to US$6.39 1/4.

 

Prices were lower on the U.S. Department of Agriculture's report, traders said.

 

The report showed planting 95% complete, compared to an average of 98% but up from 88% last week. Emergence was at 74%, down from the five-year average of 89% but up from 52% last week. The report said 63% of the crop was rated good to excellent, which was at the upper end of expectations.

 

"You look at the numbers, they were all better than expected," a trader said.

 

Outside markets, including weaker crude oil, could also push prices lower, traders said.

 

The market could be pressured by news that the Commodity Futures Trading Commission will demand more information about investors to determine whether they're evading market limits on speculation and artificially driving up world food prices, traders said.

 

The CFTC will start requiring more information about index funds and, more significantly, about the clients on the other side of the unregulated swaps deals that are being hedged on the regulated futures exchanges, the New York Times reported Tuesday. An announcement on the policy changes is expected Tuesday.

 

Also, the report said, the CFTC is putting the brakes on granting waivers that have exempted some commodity index funds from speculative limits, and is formally dropping proposed rule changes that would have extended a blanket exemption to all index funds.

 

A trader said talk of such moves has already been pressuring the market recently. He said the market will likely drop once the moves are announced, especially if the CFTC says the changes will take effect soon.

 

"It's coming, we know it's coming," he said.

 

The next upside price objective for the bulls is to push July corn prices above solid technical resistance at the contract high of US$6.39, according to a technical analyst. The next downside price objective for the bears is to push and close prices below solid support at US$6.00.

 

First resistance for July corn is seen at Monday's high of US$6.18 and then at US$6.25, the analyst said. First support is seen at US$6.08 and then at US$6.00.