July 6, 2009

CBOT Corn Outlook on Monday: Down 5-10 cents on weather, outside markets

Chicago Board of Trade corn futures are expected to open lower Monday on favorable crop weather across the corn belt.

Corn is called down 5 to 10 cents. In overnight trade, July corn was down 6 cents at US$3.39 3/4 a bushel and December was down 10 cents at US$3.47 1/2.

July is a key growing season for corn, and typical concerns of hot and dry weather haven't been seen yet this year because of unseasonably cool weather and fair amounts of rain. Corn will be entering the critical pollination phase of developmentwhen it sets yield. Hot and dry weather can hamper pollination. Traders and analysts said beneficial weather is the main factor weighing on corn.

Mostly dry conditions are expected through the corn belt Monday and Tuesday, aside from some scattered showers in some areas, said DTN Meteorlogix. Showers and thunderstorms in the northern area of the belt will occur through the week, with dryness in the south and central areas, the forecast said. Temperatures will be near to below normal in the north and near to above normal in the south.

A ridge of hot weather will approach the belt within the next 10 days, DTN Meteorlogix said. However, it will back off quickly. "Any early reproductive corn should do okay during this week and next week as well," the forecast said. A floor trader said the trade had been watching this ridge of possible heat, but now that it will likely be short-lived, it isn't helping the market.

"We are talking a possible record crop this year unless the weather turns swiftly for the worse, any price strength will be met by farmer hedging and old crop sales," said Dennis Gartman in a market commentary.

Outside markets are also weighing on corn, traders and analysts said. Monday morning, the U.S. dollar is higher and crude oil and stocks are lower. "The outside markets are getting killed, and that's hurting us," a floor trader said.

The U.S. Department of Agriculture will release its weekly crop progress update at 4 p.m. EDT Monday. After last week's rating of 72% of crops as good-to-excellent, further bearish news could likely influence corn. An AgResource Company market commentary estimates a slight increase in this rating for the week ending July 5. "Following the rains on the weekend and lack of extreme heat, corn/soy conditions should at worst hold steady," AgResource said.

December corn fell 11.6% last week, hitting a fresh six-month low. The next downside price objective for the bears is to push and close prices below strong technical support at the contract low of US$3.49 1/4 a bushel, a technical analyst said.