August 11, 2009

 

CBOT Corn Outlook on Tuesday: Up 2-4 cents; consolidation, outside support

 

 

Chicago Board of Trade corn futures are expected to open higher Tuesday on outside market strength amid consolidation ahead of Wednesday's key government reports.

 

Corn is called 2 to 4 cents higher. In overnight trade, September corn was up 3 1/4 cents to US$3.27 1/2 per bushel and December corn was up 3 3/4 cents to US$3.34 1/4.

 

Strength in soybeans, which are expected to rally in a correction from Monday's losses, should give spillover support to corn, traders said. Other outside markets, including a weaker dollar and stronger crude oil, are also supportive, they said.

 

Traders expect the day's theme to be consolidation, as the trade awaits Wednesday's crop production and supply and demand reports from the U.S. Department of Agriculture. The reports will be released at 8:30 a.m. EDT.

 

The trade is expecting the USDA to increase both production and ending stocks from its July estimates.

 

Corn futures have been unable to lean on weather forecasts for support. Although the U.S. corn belt has heated up recently, any threat to the crop has been negated by rainfall, traders said.

 

"Nobody's talking about the weather anymore," a trader said.

 

Another trader said, however, that growing concern about dryness in the eastern Midwest is supportive to the soybean market, which gives residual support to corn.

 

Corn crop conditions remain strong, although development is behind schedule.

 

The USDA said 68% of U.S. corn is in good-to-excellent shape, unchanged from last week. Traders surveyed by Dow Jones Newswires anticipated a 1 to 2 percentage point decline in ratings.

 

Eighty-nine percent of the U.S. corn crop was silking as of Sunday, just below last year's 91%, and below the average of 96%, the USDA said. Twenty-four percent of the crop was reported in the dough stage, down from 28% last year, and below the five-year average of 46%.

 

The market has little fundamental support, traders said. They said Monday's gains in the corn market were due to unwinding of the corn-soybean spread.

 

The next upside price objective is to push December prices above solid technical resistance at US$3.50 a bushel, 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 Monday's high of US$3.37 and then at US$3.40, the technical analyst said. First support is seen at US$3.25 and then Monday's low of US$3.21 1/4.

 

In export news, China's July corn exports fell 22% from a year earlier to 11,136 metric tonnes, the General Administration of Customs said Tuesday.