July 15, 2008

 

CBOT Corn Outlook on Tuesday: Up 5-7 cents on technical bounce, outside markets

 

 

Chicago Board of Trade corn futures are expected to open 5 to 7 cents higher Tuesday following overnight gains, as prices bounce amid a potentially oversold market, analysts said.

 

In overnight trading, September corn was up 7 1/2 cents to US$6.71 1/4 per bushel, December corn was up 7 1/2 cents to US$6.89 3/4 and March 2009 corn was up 7 1/2 cents to US$7.07 3/4.

 

After falling sharply since July 3, the market may rebound Tuesday, with support from outside markets, analysts said.

 

"I think with the recent decline in prices, we're oversold," said Shawn McCambridge, senior grains analyst with Prudential-Bache. "We've just kind of exhausted the selling at this price level, at this point of the year."

 

December corn has fallen from a July 3 close of US$7.77, closed below its 50-day moving average Monday for the first time since March.

 

Farm Futures noted in a morning commentary that open interest increased on Monday's move lower, calling it "a sign that new selling was entering the market as bears become bolder in their assault."

 

Corn's rise in overnight trading came late in the session, and may have been due mostly to a drop in the dollar index, a trader said. A weaker dollar, along with higher energy and metals prices, could provide further support to corn Tuesday, analysts said.

 

Traders will continue to eye the weather, which has prompted the recent losses. Weather in recent weeks has been good for crop development, although analysts say the crop will remain vulnerable to any extreme weather patterns in the U.S. corn belt this summer. Traders say the market is very sensitive to any potential for a hot, dry weather pattern, which could damage the crop.

 

Lingering uncertainty about the crop and buying by end-users has given the market some underlying support recently, McCambridge said.

 

In Monday's crop progress report, the U.S. Department of Agriculture said silking of the U.S corn crop stood at 13%, up from 6% in the week ended July 6, but below the five-year average of 36%.

 

Iowa, the top corn-producing state, was especially behind, with 1% of the corn crop was silking, up from 0% the preceding week but below the average of 22%. In Illinois, 14% of the crop was silking, up from 1% the previous week but below the average of 64%.

 

The USDA said the good-to-excellent condition rating for the U.S. corn crop was 64%, up two percentage points from the previous week and in line with analysts' estimates of a one- to three-point rise.

 

Analysts said the USDA report was "neutral."

 

The next upside price objective is to push and close prices above psychological resistance at US$7.00, a technical analyst said. The next downside price objective is to push and close prices below solid technical support at the May high of US$6.55 1/2.

 

First resistance for December corn is seen at US$6.85 and then at Monday's high of US$6.96 1/2. First support is seen at Monday's low of US$6.80 and then at US$6.75.