June 26, 2007

 

CBOT Corn Outlook on Tuesday: 1-2 cents higher on position squaring, weather

 

 

Chicago Board of Trade corn futures are predicted to begin day time trading 1-2 cents higher Tuesday as the market is expected to see some position squaring ahead of Friday's acreage and stocks numbers and ideas recent gains were overdone and due for a correction, analysts said. Medium-term weather forecasts expecting hot and dry conditions for much of the U.S. Midwest might also draw some support, they added.

 

In overnight electronic trading, July corn rose 2 cents to US$3.59 3/4 per bushel, September gained 2 1/2 cents to US$3.69 1/2 and December rose 2 cents to US$3.76. E-CBOT volume in December was 8,059 contracts.

 

The market has sharply declined recently and is overdone and due for a correction, a commission house analyst said. December corn has fallen over 50 cents from its highs set in last week's trading.

 

Acreage and stocks numbers are due out this Friday and participants will want to even up positions ahead of the report, the analyst added.

 

Some support may also be generated from the weather, a trader said. Although near-term weather is supportive to the crop, medium-term forecasts suggest a hot and dry weather pattern will return to the U.S. Midwest next week, close to when the crop begins its pollination, or reproductive stage, the trader added.

 

In the western U.S. Midwest, there is a chance for a few light showers Tuesday with a chance for showers in southern sections on Wednesday and Thursday, DTN Meteorologix Weather said. Rainfall should average 0.10-0.75 and locally heavier in Missouri and a trace-0.35 elsewhere in the period. Temperatures are expected to average in the 80s and low 90s degrees Fahrenheit Tuesday and in the 80s F Wednesday.

 

In the eastern U.S. Midwest, mainly dry weather is expected on Tuesday with a chance for scattered showers and thundershowers on Wednesday, which may linger north on Thursday, Meteorologix Weather said. Rainfall should average 0.25-1.00 inch and locally heavier along and south of a line extending from St. Louis through Dayton. Showers of 0.10-0.50 inch are expected in central locations. Temperatures are forecast in the upper 80s to low 90s F Tuesday and Wednesday.

 

In the 6- to 10-day outlook, temperatures are expected to above normal west and south, and near-to-above-normal northeast. Rainfall is predicted near-to-mostly below normal.

 

Corn crop conditions improved from the previous week, with 73% of the U.S. corn crop in good-to-excellent condition, three percentage points above last week's level, the U.S. Department of Agriculture reported Monday afternoon.

 

Crop conditions in Illinois improved by 13 percentage points from a week ago in the good-to-excellent category. Four percent of the crop was silking nationwide, in line with last year and the five-year average.

 

On daily technical charts December corn hit a fresh four-week low on long liquidation pressure from recent rains and forecasts for additional moisture, a technical analyst said. Serious near-tern technical damage has occurred that might suggest a market top is in place, with a bearish V-Top reversal pattern on the daily bar chart as well as a bearish double-top reversal pattern, the analyst said.

 

The bulls' next upside price objective is closing prices above solid resistance at US$3.95 per bushel, which would fill on the upside last week's downside price gap on daily technical charts. The bear's next downside objective is closing prices below solid chart support at the May low of US$3.56 per bushel.

 

First resistance for December corn is seen at US$3.77 1/2 and then at US$3.80. First support is seen Monday's low of US$3.73 and then at US$3.70.

 

In other corn news, corn futures on China's Dalian Commodities Exchange settled lower with the benchmark January contract down RMB21 at RMB1,584 per metric tonne.

 

A drought in northeast China has impacted more than half of the agricultural products planted in major corn and soybean growing areas, the official Xinhua News Agency said late Monday.

 

South Korea's Korea Feed Association purchased 385,000 metric tonnes of U.S. corn in a tender concluded Tuesday, an association official said. Delivery is scheduled for October-November.