July 21, 2009

 

CBOT Corn Outlook on Tuesday: Down 1-3 cents; crop weighs; profit-taking

 

 

Chicago Board of Trade corn futures are expected to open lower Tuesday on continued bearish weather and profit-taking following Monday's modest gains.

 

Corn is called 1 to 3 cents lower. In overnight trade, September corn was down 2 1/2 cents to US$3.20 3/4 per bushel and December corn was down 2 1/4 cents to US$3.31 1/2.

 

Amid a lack of significant news, the market's focus remains the weather and an optimistic crop outlook. Forecasts call for moderate, or cool, temperatures through the end of the month, which is considered favorable as the crop moves into the pollination stage. Rainfall is expected throughout the Midwest this week, which is also bearish.

 

Outside markets, particularly higher crude oil, could lend support Tuesday, traders said. Prices dipped overnight amid profit-taking, they said.

 

Traders said the U.S. Department of Agriculture's crop progress report Monday afternoon was neutral or slightly negative.

 

The USDA said 71% of corn was in good-to-excellent condition as of Sunday, unchanged from the previous week. Traders had expected to see the rating stay steady or slip 1-2 percentage points.

 

However, development of the corn crop continued to lag behind normal due to late planting in some states and the cool weather. The crop was 31% silking, compared to 31% last year and the average of 54%.

 

Analysts say the slow pace of crop development leaves the crop vulnerable to an early freeze. In order to approach the record yields that some are predicting, corn would need a late frost this year.

 

Export demand has been solid following the recent break in futures prices, analysts said. Ethanol producers have also had improved margins, another positive sign for demand.

 

"According to sources, an average ethanol plant in Iowa is making 14 cents/gal and an average plant in Illinois is earning 18 cents/gallon," Country Hedging said in a morning commentary.

 

A trader noted the underpinning support from demand but said outlook for a strong crop remains the dominant feature. He added that "we're not out of the woods technically."

 

China is selling two million metric tonnes of corn this week, but the trader said the sales would have little or no effect on prices. "It's a domestic thing," he said of China's sales.

 

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 Monday's high of US$3.35 and then at US$3.40, the technical analyst said. First support is seen at Monday's low of US$3.28 1/2 and then at the contract low of US$3.24 1/2.