June 12, 2008

 

CBOT Corn Outlook on Thursday: Slightly higher as market rations demand

 

 

Chicago Board of Trade corn futures are expected to open slightly higher Thursday, with gains on crop concerns limited by profit-taking and weaker outside markets, traders said.

 

In overnight trading, July corn was up 1 1/4 cents to US$7.04 1/2 per bushel, September corn was up 1 1/2 cents to US$7.18 1/4 and December corn was up US$7.34 3/4.

 

After closing at an all-time high Wednesday, July corn reached a new high in overnight trading at US$7.21 3/4 before dropping as traders booked profits, traders said. A technical analyst had pegged resistance for July corn at US$7.10 and then at US$7.20. First support is seen at US$7.00 and then at US$6.00.

 

"I think yesterday we had what I'd call panic-buying as the trade tries to assess production that continues to sink," said Don Roose, president of U.S. Commodities in Des Moines. With a "precariously tight" balance table, the market is also trying to assess whether prices have climbed high enough to ration demand, Roose said.

 

Analysts say it can be difficult to quickly determine whether attempts to ration corn demand are working. Cash basis levels, export sales and animal production offer clues, analysts said.

 

Traders said that given the approaching weekend and how far prices have already climbed, continued upside momentum could be limited.

 

"When you get a move like this, people are going to take some profits," a trader said.

 

Potentially drier weather next week could improve the crop's prospects, traders said, although more rain is forecast this week. DTN Meteorlogix calls for scattered showers and thunderstorms in the northwest and central corn belt Thursday, and showers and thunderstorms in central and eastern areas Friday. Totals of 0.20 to 1.0 inches are expected, with locally heavier amounts Friday.

 

Export sales totaled 578,400 metric tonnes for the week ended June 5, down from 702,400 from the prior week, the U.S. Department of Agriculture reported. Roose said the number was a possible indicator of reduced demand in light of high prices.

 

The next upside price objective is to push and close July prices above technical resistance at US$7.25, a technical analyst said. The next downside price objective for the bears is to push and close prices below solid support at Wednesday's low of US$6.73 1/4.

 

After closing 30 cents higher, the daily limit, on Wednesday, the limit is an expanded 45 cents Thursday.