June 11, 2008

 

CBOT Corn Outlook on Wednesday: Higher on flooding, upside momentum

 

 

Chicago Board of Trade corn futures are expected to open sharply higher Wednesday, following new all-time highs overnight, as reports of flooding and more rain in the U.S. corn belt heighten concerns about the crop, analysts said.

 

In overnight trading, July corn was up 10 1/4 cents to US$6.83 1/2, and peaked at US$6.86 1/2, a new all-time high. September corn was up 10 1/4 cents to US$6.97 and December corn was up 10 1/2 cents to US$7.13 1/4.

 

Corn has seen new money enter the market in recent days, and the market's momentum should continue today, traders said.

 

"I see follow-through strength as new longs enter the market," said Terry Reilly, an analyst with Citigroup.

 

July corn prices have climbed US$1.10 since hitting a low of US$5.73 on May 29.

 

Reports of widespread flooding in areas from Iowa to Wisconsin to southern Indiana could reduce total planted acreage, analysts said. With the USDA already projected lower ending stocks for the 2008-09 year, the market must ration demand through higher prices, and a trader said the market has yet to fully absorb the extent of the problem.

 

"The trade always seems to struggle in catching up with rain-based damage, and acreage losses," a trader said.

 

Prices climbed Tuesday despite lower crude oil and a stronger dollar, and a turnaround in those markets could extend corn's rally, a trader said.

 

The DTN Meteorlogix forecast calls for showers and thunderstorms in the north and west corn belt Wednesday. Shower and thunderstorms will dump between 0.25 and 1.50 inches of rain in the north and west corn belt Thursday, with those rains moving west through the eastern corn belt by Friday.

 

The next upside price objective is to push and close July prices above solid technical resistance at Tuesday's contract high of US$6.73 3/4. The next downside price objective for the bears is to push and close prices below solid support at this week's low of US$6.50.

 

First resistance for July corn is seen at US$6.73 3/4 and then at US$6.80. First support is seen at Tuesday's low of US$6.55 1/4 and then at this week's low of US$6.50.