July 3, 2006

 

CBOT Corn Outlook on Monday: Firmer on weather, overnight trade

 

 

Corn futures at the Chicago Board of Trade are expected to open firmer Monday, supported by strength overnight and forecasts for warmer, drier weather in the corn belt after the current weather pattern passes.

 

Most-active December corn is called to open 3-4 cents a bushel higher.

 

In e-cbot overnight trade, July corn rose 5 cents to US$2.40 1/2 and December corn rose 4 1/2 cents to US$2.64 3/4.

 

Near-term weather is favorable for corn production in both the western and eastern corn belt as showers and cooler temperatures are seen, DTN Meteorologix said. By the weekend though, the western corn belt is expected to turn hot.

 

Looking ahead to the longer range forecast, two main weather models, the U.S. and European, disagree over what might transpire over the seven to 10 day outlook. The US model suggests showers and cooler temperatures in the Midwest during this timeframe, while the European model forecasts a warmer to hotter and drier period for the Midwest. Joel Burgio, meteorologist for DTN said he favored the European model, but admitted "there is some uncertainty in this outlook."

 

The weather is going to be main driver of trade Monday.

 

"They have been taking rain out of the forecast all along," said Jason Roose, analyst, US Commodities. "This is one year we can't have a weather problem" due to strong ethanol demand.

 

Roose said it seems that perspectives on the market are changing now that corn is entering the critical pollination period. When the market was falling, he said, traders would look at the recent news that about 15% of the major corn-producing areas were in severely dry condition.

 

"People would say, it's just 15%," he said. Now, though, with the weather such a big factor in the market again and with acreage for this crop year known, the attitude is changing to where that 15% figure is being viewed as much more important.

 

December corn gained some fresh upside technical momentum in Friday's rally, a technical analyst said and now the next upside price objective for the bulls is to have prices close above chart resistance at US$2.72. First resistance for December corn is seen at US$2.61 3/4 - Friday's high - and then at US$2.65. First support is seen at US$2.57 1/2 - Friday's low - and then at US$2.55.

 

The Commodity Futures Trading Commission said fund upped their short corn futures and options on futures positions by 29,448 positions, but still remain net long 147,106 contracts. Commercial traders are now net short 49,587 contracts.

 

In other news, Chinese farmers are switching from feeding livestock corn to using wheat as corn prices there remain high.

 

Monday is a full trading day for CBOT agriculture markets, but the exchange will close Tuesday for the Independence Day holiday. Pit trade resumes Wednesday.