August 7, 2009

 

CBOT Corn Outlook on Friday: Down slightly; lack of weather threat

 

 

Chicago Board of Trade corn futures are expected to open slightly lower Friday, but the market is lacking direction as the trade eyes weather forecasts and consolidates ahead of next week's key government reports.

 

Corn is called 1 to 2 cents lower. In overnight trading, September corn was down 1/2 cent to US$3.32 a bushel and December corn was down 1 1/2 cents to US$3.38 3/4.

 

The market should be under pressure in the absence of any significant news, traders and analysts said. The weather, which is a focus of the trade currently, is posing no threat, according to forecasts.

 

DTN/Meteorlogix is calling for hot weather during the next few days in the Midwest, accompanied by showers and thunderstorms in northern areas. More moderate temperatures are expected the first half of next week, and another round of showers and thunderstorms is expected at the end of the 10-day outlook.

 

The benign weather is continuing to fuel expectations of a strong crop. Informa Economics' projection of a huge crop with record yields of 164 bushels an acre has weighed on prices the past two days, analysts said.

 

"The bulls are beginning to run out of reasons to retain their length unless the [U.S. Department of Agriculture] surprises the market with a sizable reduction in planted and harvested acres" or the weather turns bullish during the end of the growing season, Benson-Quinn Commodities analyst Jon Michalscheck said in market commentary.

 

Outside markets are providing little direction Friday morning, traders said. One trader said that corn "feels like it's going to be under pressure unless we get help from the soys." Weakness in wheat and corn are feeding off each other, the trader added.

 

The trade is looking ahead to Aug. 12 reports from the USDA on both production and supply and demand. Traders are expecting the USDA to show an increase in yield and total production.

 

Analysts note the collapse of the hogs market as adding psychological pressure to corn, as it promises weaker feed demand.

 

Some livestock dealers and market managers describe the market conditions as worse than in 1998, when a washout of small producers began due to a collapse in cash prices. Prices are not as low as they were in late 1998 but feed costs are much higher, and producers have been losing money for nearly two years. Industry analysts estimate the collective losses for producers during the past two years at nearly US$4.5 billion.

 

Technically, "the market is firmly back within the sideways trading range that confined market action for the month of July," a technical analyst said.

 

The corn bulls' next upside price objective is to push prices above US$3.50, the top of the old July sideways trading range. The next downside price objective for the bears is to push and close prices below major support at the July low at US$3.14 3/4.

 

First resistance for December corn is seen at US$3.50 and then at US$3.57 1/2. First support is seen at US$3.30 and then US$3.24 1/2.