CBOT Corn Outlook on Tuesday: Up 1-2 cents; short-covering, technical strength

 

 

Follow-through buying and short-covering after Monday's climb is expected to push Chicago Board of Trade corn futures slightly higher on Tuesday's open.

 

Corn is called 1 to 2 cents higher. In overnight trade, September corn was up 3/4 cent to US$3.23 per bushel and December corn was up 1/2 cent to US$3.34 1/4.

 

Market bulls will look to continue corn's momentum after it rebounded from Friday losses and closed above its 10-day moving average. The market was supported overnight by a weaker dollar, although traders said that should offer little of any support Tuesday morning.

 

Some traders think the market has set a seasonal low after rallying on last week's news the U.S. Department of Agriculture would resurvey corn acreage in seven states.

 

But most of the market's strength is attributed to short-covering. Fundamentals mostly remain weak, traders said, as weather remains benign. Some analysts and traders are eyeing potential hot, dry weather at the back end of the 10-day forecast, but others say that the threat is minimal at best, particularly since much of the crop will have pollinated by then.

 

Monday's crop progress report showed crop development behind, but conditions still much better than normal for this time of year.

 

The USDA said 70% of U.S. corn is in good-to-excellent shape, down one percentage point from last week. Traders anticipated ratings would remain unchanged or drop by as much as two percentage points.

 

Fifty-five percent of the U.S. corn crop was silking as of Sunday, on par with last year, but below the average of 76%, the USDA said. Seven percent of the crop was reported in the dough stage, on pace with last year, but below the five-year average of 17%.

 

Cool summer temperatures have largely been seen as supportive, as analysts say there is a correlation between cool weather and strong yields. The cool weather also raises the prospect of an early freeze, and of the possibility the crop won't be fully developed when a freeze hits.

 

"While acknowledging that this is a background supportive factor, for now it appears that the yield boosting impact of the cool readings is more than offsetting ideas of lost bushel production should part of the crop succumb to a killing freeze," Western Milling analyst Joel Karlin said in a newsletter.

 

Recent strong export demand is also considered supportive, as weekly export inspections reported Monday were well above trade expectations.

 

The next upside price objective is to push December 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, a 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 last week's high of US$3.40 and then at US$3.45. First support is seen at US$3.30 and then at US$3.25.

 

In international news, the Chinese government's corn sales Tuesday helped support market prices, with higher volumes compared with last week.