July 22, 2009

 

CBOT Corn Outlook on Wednesday: Down 1-2 cents on weather, no bullish news

 

 

Chicago Board of Trade corn futures are expected to open slightly lower Wednesday amid continued bearish weather and a lack of supportive news.

 

Corn is called 1 to 2 cents lower. In overnight trade, September corn was down 1 1/4 cents to US$3.10 1/4 per bushel and December corn was down 1/2 cent to US$3.21 1/2.

 

The optimistic crop outlook is the focus of the market, and the weather is expected to remain benign for corn. Drew Lerner, meteorologist with World Weather Inc., said that all major crop producing areas of the U.S. corn belt will see rain over the next 10 days, and that temperatures will remain near or below average.

 

"The situation will be great for corn pollination except in areas where temperatures are substantially below average," Lerner said.

 

A floor trader said "it seems like the market is factoring in record yields."

 

Some traders have said for days that the market has overdone the break to the downside, yet prices continue to drift lower. The market set new lows in the September and December contracts Tuesday, but prices held at or slightly above those lows in overnight trade.

 

The trader said Tuesday's slide was not caused by new selling as much as weak bids.

 

"There was very little consumer interest," he said. "I think they're putting their hands in their pockets right now."

 

Mike Zuzolo, senior analyst for Risk Management Commodities, said corn and other row crops came under pressure Tuesday after the Commodity Futures Trading Commission's chairman told a U.S. Senate subcommittee that the CFTC would take aggressive action to repair the wheat futures market. The chairman said the CFTC will consider revising position limits and improving transparency.

 

Analysts consider any move to limit speculation in the market as bearish.

 

While the weather is widely seen as bearish, traders acknowledge that an early first frost could cause significant damage to the crop, which was mostly planted late. But traders say the threat is still too far in the future to factor into the trade's current psychology.

 

The next upside price objective is to push and close December 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$3.25 and then at US$3.30, the technical analyst said. First support is seen at Tuesday's contract low of US$3.20 1/2 and then at US$3.15.