July 31, 2009

 

CBOT Corn Outlook on Friday: Up 2-3 cents on follow-through, technical momentum

 

 

Chicago Board of Trade corn futures are expected to open higher Friday on follow-through buying from Thursday's rally and supportive outside markets, analysts said.

 

Corn is called 2 to 3 cents higher. In overnight trade, September corn was up 2 3/4 cents to US$3.35 per bushel and December corn was up 2 1/4 cents to US$3.44 1/2.

 

The market climbed Thursday, largely on support from surging soybeans. Corn surged above its 20-day moving averages and is looks to have some short-term technical momentum, analysts said.

 

"Key will be if corn futures can post follow-through buying strength on Friday to produce a bullish weekly high close," a technical analyst said.

 

Corn has dropped seven consecutive weeks. Last week it had seemed poised for a higher weekly close but tumbled on Friday to end lower on the week.

 

In addition to strength in soybeans, corn could have support from higher equities and a weaker dollar, as it did overnight, analysts said. But crude oil is weaker, which should limit the outside support, a trader said.

 

Weather is still mostly viewed as bearish, with the Midwest's cool temperatures historically translating into strong yields. Some say the season's first frost is an increasing concern because of the lateness of the crop, but others say any frost is too far in the future to worry about.

 

"It just depends on who you talk to," a trader said.

 

In export news, the U.S. announced Friday morning it has sold 120,000 metric tonnes of corn to Mexico for the 2009-10 marketing year.

 

The market appears to have found its footing after dropping roughly US$1.50 from early June highs. Commercial buying has helped support the market, trader say. Selling by farmers, who held their grain while the market fell, could limit the upside price potential, traders say.

 

MF Global director of research Rich Feltes said in a monthly outlook that although U.S. and world fundamentals are negative, corn seasonals tend to bottom out in early August. Both corn and wheat are running into long-term support on weekly charts, "which may necessitate more evidence of increasing '09 US corn yield potential before staging downside breakout from trading ranges in place since early July."

 

Traders and analysts note that the government has reported ethanol production climbed in May. Increased ethanol demand could help offset weak feed demand, a trader said.

 

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, 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 Thursday's high of US$3.45 and then at US$3.50, the technical analyst said. First support is seen at US$3.40 and then US$3.35.