June 19, 2009

 

CBOT Corn Outlook on Friday: Up 1-2 cents; short-covering, support at US$4

 

 

Chicago Board of Trade corn futures are poised to open slightly higher Friday following overnight gains, with short-covering expected following losses this week.

 

Corn is called 1 to 2 cents higher. In overnight trading, July corn was up 1 1/2 cents to US$4.04 3/4 per bushel and December corn was up 1 1/2 cents to US$4.25 1/4.

 

The July contract has lost 22 1/4 cents on the week, but it remains above the weekly low of US$3.98, set Wednesday, despite Thursday's modest losses.

 

"When we traded below US$4, it was going to do one of two things: it was either going to break the market back sharply lower or we were going to find support, and we found support," said Shawn McCamrbidge, senior grains analyst for Prudential Bache.

 

He added that the market should continue to find support from commercial and end-user support below US$4.

 

Thursday's trade "looked like another one of those consolidation sessions with very little if any fresh news the give the market new direction," Benson Quinn Commodities analyst Jon Michalscheck said in a market commentary.

 

Analysts say the weather is currently neutral, with ample rains and warming temperatures considered good crop weather. McCambridge said the fact that the market appears to have found support despite the good weather shows there could be some upside potential.

 

"If the weather changes at all, it's going to be to a less favorable situation for the corn crop," McCambridge said.

 

In export news, analysts reported that Malaysia has bought 50,000 metric tonnes of U.S. corn.

 

The trade is starting to look ahead to the June 30 acreage report, which is expected to show a cut in planted corn acres. Traders are also awaiting a private firm's report on acreage, expected to be released Friday morning after the market opens.

 

Serious near-term technical damage has been inflicted in the corn market recently, and a bearish weekly low close on Friday would provide the bears with fresh downside technical momentum, technical analyst Jim Wyckoff said.

 

The next upside price objective is to push and close July prices above solid technical resistance at US$4.50 a bushel, the technical analyst said. The next downside price objective for the bears is to push and close prices below psychological support at US$4.00 a bushel.

 

First resistance for December corn is seen at Thursday's high of US$4.29 1/2 and then at US$4.38, the technical analyst said. First support is seen at Thursday's low of US$4.22 1/2 and then at this week's low of US$4.19 1/4.

 

Dennis Gartman said in Friday's Gartman Letter that he still sees bullish potential in the market. He said that "the recent weakness in corn that took July corn to and just under US$4.00/bushel looks uncommonly similar to the break back in early April that took corn from US$4.20 to US$3.70 where support 'lived,' and to the break in January-early March when corn fell from US$4.20 to US$3.55.

 

"The lows are progressively higher, and so too the highs," he wrote.