July 24, 2009

 

CBOT Corn Outlook on Friday: Flat to 2 cents higher; more short-covering

 

 

Chicago Board of Trade corn futures are expected to open flat to slightly higher Friday, with more short-covering expected as the trade readjusts to an unclear acreage picture.

 

Corn is called steady to 2 cents higher. In overnight trade, September corn was down 3/4 cent to US$3.72 3/4 and December corn was down 3/4 cent to US$3.39 1/2.

 

The market is coming off a surge Thursday prompted by the U.S. Department of Agriculture's announcement that it would conduct new surveys in seven states and revise corn acreage. The trade mostly thinks that a reduction in acres is likely, with estimates ranging from 250,000 to 1.5 million fewer acres.

 

Open interest dropped on Thursday's rally, suggesting short-covering, analysts said.

 

The market is up 4 1/2 cents in the September contract on the week. Midwest Market Solutions president Brian Hoops noted this would be the first higher weekly close since the first week of June.

 

"Because of that, I think you could see some more short-covering, not only today but also next week and into the end of the month," Hoops said.

 

The market is seen having more upside potential, but analysts say farmer selling could provide a headwind for the market. Producers are said to still hold significant grain, having refused to sell as the market lost almost US$1.50 since early June.

 

"I think they'll certainly be moving on this rally, kind of as a last-ditch effort," Hoops said.

 

Good crop-growing weather also continues to weigh, analysts said.

 

Corn prices are still in a six-week-old downtrend, a technical analyst said, but "good follow-through buying and a bullish weekly high close on Friday would suggest that a market low is in place."

 

The next upside price objective is to push prices above solid technical resistance at US$3.56 3/4 a bushel, which would fill on the upside a downside price gap on the daily bar chart, the technical analyst said. The next downside price objective for the bears is to push and close prices below solid technical support at the contract low of US$3.14 3/4 a bushel.

 

First resistance for December corn is seen at US$3.40 and then at US$3.55. First support is seen at US$3.35 and then at US$3.30.

 

In international news, China will sell more soybeans and corn in the northeast major producing areas next week, said an official statement published on China National Grain and Oils Information Center's Web site Friday.

 

The government will sell 500,000 metric tonnes of soybeans and 2 million tonnes of corn, it said.

 

This week, the government sold 745,900 tonnes of corn, or 37% of the 2 million tonnes it planned to sell. But it failed to sell any of the 500,000 tonnes of soybeans it planned to sell since the base price was higher than market prices.