July 7, 2008

 

CBOT Corn Outlook on Monday: Sharply lower on bearish weather

 

 

Chicago Board of Trade corn futures are expected to open 25 to 30 cents lower Monday, following overnight losses on weather forecasts and outside markets.

 

In overnight trading, July corn, which is trading without limits because it is in delivery, closed down 34 cents to US$7.12 per bushel. September corn ended down 30 cents, the exchange-imposed daily limit, to US$7.27 3/4 and December corn was down 30 cents to US$7.47.

 

Forecasts calling for weather that should be favorable to crop development over the next several days are pressuring prices, analysts said.

 

"Overall, the weather is certainly more favorable than what we saw on Thursday, and that's what's causing the markets to tumble a bit," said Terry Reilly, an analyst with Citigroup.

 

Prices had rallied Wednesday on fears of hot, dry weather that would damage the crop, and many traders held their long positions headed into the long Independence Day weekend on the possibility of that heat wave. But forecasts now call for periodic showers this week, which should benefit the crop in most places, analysts said.

 

Traders and analysts say the market will remain very sensitive to weather forecasts.

 

Analysts expect corn to quickly drop by its exchange-imposed 30-cent daily limit, and said it could remain there for much of the day.

 

"Last week, we saw trend-following funds jump into the market," said Shawn McCambridge, senior grains analyst with Prudential-Bache in Chicago. "This morning we're going to see some of them bail."

 

Weakness in outside markets is adding to the bearish undertone in the corn market, Reilly said. In a reversal from last week, the dollar is showing strength and crude oil prices are lower, analysts said.

 

"It's just one more reason not to hold on to a long position," McCambridge said.

 

McCamrbidge added that the market is "very defensive" as traders anticipate changes by the Commodity Futures Trading Commission to address the role of speculators in the commodities markets. He said there was talk of a possible announcement Thursday, although none came.

 

"That will continue to hang over the market until we get something," McCamrbidge said.

 

The bulls' next upside price objective is to push and close prices above major psychological resistance at US$8.00, a technical analyst said. The next downside price objective for the bears is to push and close prices below support at US$7.35 3/4, the July 1 low and a key pivot low on the daily chart, the analyst said.