June 15, 2009

 

CBOT Corn Outlook on Monday: Down 5-7 cents on outside, technical pressure

 

 

Chicago Board of Trade corn futures are expected to open lower Monday as the market remains under pressure following Friday's sell-off and outside markets weigh, analysts said.

 

Corn is called 5 to 7 cents lower. In overnight trade, July corn was down 7 1/2 cents to US$4.18 per bushel and December corn was down 8 cents to US$4.39 3/4.

 

Outside macro markets have largely set the market's direction this month, and a stronger dollar and weaker crude oil are expected to set a bearish tone Monday morning, analysts said.

 

Follow-through selling is also expected after a bearish close Friday.

 

"The bearish technical picture for corn is intensifying," Barclays Capital said in a report. "The repeated failure to overcome the US$4.71 3/4, January highs (in the December contract) and subsequent closing break below the 21 day average (now US$4.55 1/4), a first since April 29, all warn of a near-term turn in trend."

 

In addition to the short-term average, corn also broke through the 200-day moving average on Friday. The market hit sell stops on Friday, which accelerated losses, traders said.

 

Analysts said that if corn retains this bearish posture that funds will likely start to liquidate, increasing the losses.

 

Speculative funds cut 3,521 contracts from their CBOT corn long positions and cut 9,455 contracts from their short positions, putting them net long 132,563 contracts, the Commodity Futures Trading Commission said Friday.

 

The supplemental commitment of traders report also showed that commercial funds added 1,453 contracts to their long positions and added 442 contracts to their short positions, putting them net short 311,063 contracts. Index funds added 2,158 contracts to their long positions and added 2,480 contracts to their short positions, putting them net long 289,846 contracts, the CFTC said.

 

The next upside price objective is to push and close July prices above solid technical resistance at the June high of US$4.50 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 US$4.06 1/4 a bushel.

 

First resistance for July corn is seen at US$4.30 and then at US$4.35. First support is seen at Friday's low of US$4.20 3/4 and then at US$4.17 1/4.

 

In addition to the outside markets and technical pressure, this week's weather also looks bearish, traders said. Warmer, wet weather is expected, particularly across the western corn belt. Although farmers in the eastern corn belt suffered long delays in getting the crop planted this year, at this point the warm moist conditions are considered beneficial.