July 23, 2007

 

CBOT Corn Outlook on Monday: Down 4-5 cents as cooler weather prevails

 

 

A shift in the U.S. Midwestern weather forecast to a cooler, weather outlook is expected to pressure Chicago Board of Trade corn futures Monday.

 

Most-active December corn futures are called to open down 4-5 cents a bushel.

 

The market's reaction to the change in the weather forecast was seen in overnight e-cbot trade, which was also lower. December corn ended overnight trade down 5 cents a bushel to US$3.28 1/2 cents.

 

Private weather firm DTN Meteorologix highlighted the change in the forecast.

 

"I have added rain into the forecast for the Midwest region and cooled off the temperatures for this coming Thursday and Friday," said Joel Burgio, senior agricultural meteorologist at DTN, in the firm's early outlook.

 

Previous forecasts called for hotter, drier weather in the Midwest this week, but the current weather models remove any significant hot weather, particularly for the eastern corn belt. The western corn belt remains warmer and drier.

 

For Monday in the western corn belt, Metorologix said there's a chance for scattered thundershowers, 0.25-0.75 inch and locally heavier, through eastern and southern Iowa and northern Missouri through Tuesday and dry Wednesday. By Thursday into Friday scattered showers return and temperatures cool.

 

In the eastern corn belt, Monday and Tuesday bring mostly dry weather. There's a chance for scattered showers through the Ohio river valley during Wednesday, mainly dry elsewhere in the region. By the end of the week, Meteorologix said there's a chance for scattered to widely scattered showers and thunderstorms. Temperatures average near to above normal Thursday, near normal Friday.

 

With the weather remaining mild, traders will take the weather risk premium out of prices, analysts said, with buyers likely remaining out of the market for now.

 

"Every Friday, we expect heat to damage the crop and each Monday we come in with mild temperatures and moisture," said Jason Roose, analyst with U.S. Commodities.

 

Aside from the weather, other news for corn remains thin. Asian traders told Dow Jones Newswires that South Korea may buy corn this week as the weather is expected to bring lower CBOT prices.

 

Argentina's Agricultural Secretariat said Friday farmers there harvested 96% of the 2006-07 corn crop, compared with 98% on the same date a year ago. The Secretariat forecasts 22 million metric tonnes of corn coming from the 2006-07 crop.

 

A technical analyst said December corn prices are stuck in a range.

 

"While I do not see a lot of downside price potential in corn with prices at present levels, neither do I see strong upside price potential," the analyst said. The next upside price objective for bulls is a close above US$3.50 and bears seek a close under Friday's low of US$3.30 1/2.

 

In Friday's commitment of traders data from the Commodity Futures Trading Commission, funds continue to be net long corn, futures and options combined. In the week ending July 17, funds were net long 134,704 contracts. The speculators cut longs by 12,630 and raised their short positions by 16,753.

 

Commercials remain net short 36,199 contracts, but trimmed that position by cutting 19,593 short contracts. They increased longs by 22,808 contracts.

 

In the agency's supplemental report, index traders are heavily net long still, at 365,098 contracts, having added 4,282 long contracts and 714 shorts.