July 20, 2009

 

CBOT Corn Outlook on Monday: Up 2-3 cents on outside support

 

 

Chicago Board of Trade corn futures are expected to open higher Monday on outside market support and follow-through buying from Friday's modest rally, analysts said.

 

Corn is called 2 to 3 cents higher. In overnight trade, September corn was up 3/4 cent to US$3.23 per bushel and December corn was up 1 1/2 cents to US$3.33.

 

A weaker dollar and higher crude oil prices should help set a supportive tone for commodities Monday, analysts said. Corn has little fundamental strength of its own but should follow other markets, including soybeans and wheat, analysts said.

 

Weather remains mostly benign, which is fueling expectations of a large crop. But some analysts have questioned whether the temperatures have been too cool, and note that an early first freeze could still do significant damage to a crop that looks good but is behind schedule.

 

Some analysts see the market testing US$3 soon if the weather stays favorable, while others think the market has dropped a little too far already.

 

"Given the strength in the wheat and outside markets, and given the weather turning in favor of potential short-covering, we would be disappointed if the December corn didn't at least test US$3.49 this week," said Mike Zuzolo, senior analyst for Risk Management Commodities.

 

Export demand has been solid recently, as importers take advantage of the recent break in prices. The USDA announced two more sales on Monday, of 120,000 metric tonnes of U.S. corn to Egypt and another 134,000 tonnes to Mexico.

 

Of the Egyptian total, 60,000 tonnes are for delivery in the 2009-10 marketing year and 60,000 tonnes are for delivery in the 2008-09 marketing year. Of the Mexican total, 107,000 tonnes are for delivery in the 2009-10 marketing year and 27,000 tonnes are for delivery in the 2008-09 marketing year.

 

Speculative funds, having sold off in recent weeks, have finally moved net short, according to the Commodity Futures Trading Commission.

 

Speculative funds cut 11,848 contracts from their CBOT corn long positions and added 11,606 contracts to their short positions, putting them net short 4,738 positions, the CFTC said Friday.

 

The supplemental commitment of traders report also showed that commercial funds cut 3,453 long positions and cut 12,853 short positions, putting them net short 186,861 contracts. Index funds added 8,267 contracts to their long positions and added 4,800 to their short positions, putting them net long 313,242 contracts, the CFTC said.

 

Technically, the next upside price objective is to push and close prices above solid technical resistance at last week's high of US$3.49 1/4 a bushel, a technical analyst said. The next downside price objective for the bears is to push and close prices below major psychological support at US$3.00 a bushel.

 

First resistance for December corn is seen at US$3.35 and then at US$3.40. First support is seen at the contract low of US$3.24 1/2 and then at US$3.20.

 

FuturesTechs said in a Monday report that it was "constructive to see the bulls holding support" at US$3.24 3/4 on Friday, adding that "we can tentatively call this a base."