June 4, 2008

 

CBOT Corn Outlook on Wednesday: Down 2-4 cents, sideways trade continues

 

 

Chicago Board of Trade corn futures are expected to open 2 to 4 cents lower Wednesday on technical selling and background concern about Tuesday's policy announcement on commodities trading by the government.

 

In overnight trading, July corn was down 4 cents to US$6.04 per bushel, September corn was down 4 1/4 cents to US$6.17 and December corn was down 4 1/2 cents to US$6.31 3/4.

 

An analyst said losses Tuesday and overnight were mostly due to a short-term technical reversal. The market shows few signs of breaking out of a sideways, choppy trading range, traders said.

 

There could be two-sided trading on the weather, traders say. A trader says forecasts calling for more rain are bearish, because the moisture will help crop development in areas that have already been planted. But some areas, particularly the southern corn belt, have already seen too much rain, and more moisture will prompt more replanting, which would support prices, said Shawn McCambridge, senior grains analyst with Prudential-Bache. Total acres planted could start to decline, he said.

 

"In areas where acres are flooded, it may be another week or two before they can get in the fields," McCambridge said.

 

DTN Meteorlogix calls for scattered showers and thunderstorms in southern and central parts of the U.S. corn belt Tuesday, followed by showers and thunderstorms throughout the north and west both Thursday and Friday. Temperatures are expected to be much warmer, which analysts say should aid crop emergence.

 

The Commodity Futures Trading Commission's announcement Tuesday was seen as having a limited affect on the market, although traders and analysts said it could be slightly bearish as traders become increasingly concerned about what moves the CFTC will ultimately make.

 

The CFTC said it will develop a proposal to require more detailed information from index traders and swaps dealers and "whether classification of these types of traders can be improved." The commission will also withdraw proposed rules that would have increased speculative position limits on certain contracts.

 

"There's uncertainty that is likely to squeeze some long positions out of the market," McCambridge said. "I think we saw that yesterday."

 

A technical analyst said the next upside price objective is to push and close July corn prices above solid technical resistance at Tuesday's high of US$6.18 3/4. The next downside price objective is to push and close prices below solid support at US$6.00.

 

First resistance for July corn is seen at US$6.11 1/4 and then at US$6.18 3/4, the analyst said. First support is seen at Tuesday's low of US$6.01 3/4 and then at US$6.00.

 

In international news, Indonesia has revised its corn output target for 2008 upwards to 15.9 million-16.5 million metric tonnes, which may mean the country won't need to import any corn this year, a senior government official said Wednesday.

 

Also, South Korea has proposed dialogue with North Korea on the possible provision of 50,000 tonnes of corn aid to the impoverished nation, but the North has yet to respond, the unification minister said Wednesday, Yonhap news agency reported.