August 13, 2009

 

CBOT Corn Outlook on Thursday: Up 5-7 cents on follow-through, outside markets

 

 

Chicago Board of Trade corn futures are poised for a higher opening Thursday on follow-through buying after Wednesday's gains and outside market support.

 

Corn is called 5 to 7 cents higher. In overnight trade, September corn was up 6 1/4 cents to US$3.37 per bushel and December corn was up 7 cents to US$3.43 1/4.

 

A weaker dollar and higher crude oil should offer early support, traders said, as investors buy commodities amid an improving economic outlook.

 

"It seems like we're right back to trading commodities as an asset class," a trader said.

 

Wednesday's performance by the corn market was considered strong technically, as the market ended higher despite early losses on the U.S. Department of Agriculture's crop production report, which boosted yield and total output beyond expectations.

 

"Corn should open stronger this morning, with follow through buying noted overnight in the wake of a good technical performance Wednesday," Farm Futures senior editor Bryce Knorr said in a morning commentary. "Futures posted a bullish reversal higher after initially breaking support."

 

Technical analyst Jim Wyckoff said that "good follow-through buying strength on Thursday would be a technical clue that a market low is in place.

 

Export sales were at the low end of expectations. The U.S. Department of Agriculture reported weekly net sales of 833,700 metric tonnes, including 541,200 metric tonnes for 2008-09 and 292,500 for the 2009-10 marketing year.

 

Sales were down from last week's total of 1.152 million metric tonnes. Analysts expected between 800,000 and 1.2 million.

 

In other export news, the U.S. announced sales of 116,000 metric tonnes of corn to South Korea for the 2009-10 marketing year.

 

Some traders say the soybean market's big premium to corn should help underpin corn prices. The ratio is above 3-to-1, when historically it is closer to 2.25-to-1.

 

"That ratio is not going to widen forever," a trader said.

 

The next upside price objective is to push prices above solid technical resistance at US$3.50 a bushel, Wyckoff 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 Wednesday's high of US$3.39 and then at US$3.45, the technical analyst said. First support is seen at US$3.30 and then at US$3.25.

 

In international markets, soybean futures traded on the Dalian Commodity Exchange settled slightly lower Thursday, as funds switched to corn futures on concerns about drought in China's main soybean and corn producing areas in the northeast.

 

Chinese corn prices have risen in recent weeks despite state sales as the government - the only significant source of domestic supply until the next crop hits the market in December -has refused to sell current stocks at a price below its own procurement prices.

 

Prices have also been supported by expectations that the government won't let prices fall ahead of the next harvest.