August 15, 2006

  

CBOT Corn Outlook on Tuesday: Steady to up 1 cent, seeking direction

 

 

Corn futures are expected to start trading unchanged to 1 cent higher Tuesday, following a steady overnight session and on follow through from Monday's late session reversal after December set a new contract low, sources said.

 

In overnight e-CBOT trading, September corn ended unchanged at US$2.22 per bushel and December gained 1/4 cent to US$2.38 1/2. Volume in December on e-CBOT overnight was 5,836 contracts.

 

The market could see a "turnaround Tuesday" type of trade but it depends on what the funds want to do, a commission house analyst said. The funds have been large sellers in the last two sessions and could liquidate additional contracts which could weigh on the market.

 

December did set a new contract low but finished well above it Monday. The weekly crop progress report was unchanged, which was under analysts' estimates, but conditions normally begin to decline at this time of the year, so the report is favorable to the crop, he said.

 

The U.S. Department of Agriculture reported that 57% of the U.S. corn crop was in good-to-excellent condition, unchanged from the previous week and above the 51% last year at this time. Analysts had expected a 1-to-3 percentage point gain in conditions.

 

In the major states, Iowa jumped five percentage points in the good-to-excellent category, Illinois declined by one percentage point, Indiana gained four percentage points and Minnesota slipped five percentage points in the good-to-excellent category.

 

USDA reported 67% of the crop was in the dough stage above the 5-year average of 54%. Twenty-five percent of the crop was in the dent stage compared to twenty-one percent last year and the five-year average of nineteen percent.

 

On technical charts, December corn gapped open lower again on daily open auction technical bar charts and made a new contract low. Monday's price action could have produced a selling "exhaustion tail" and if there is price strength on Tuesday then that exhaustion tail would likely be confirmed to suggest a near-term low is in place, a market technician said. The next downside price objective is closing prices below Monday's contract low of US$2.34 1/4, and the next upside price objective is filling Monday's downside price gap on the daily chart, he added. First resistance for December is US$2.41 1/4 and then at US$2.45. First support is seen at US$2.34 1/4 and then at US$2.32.

 

Cash corn basis bids were unchanged to higher Tuesday morning. Central Illinois was unchanged at 16 cents under the September future.

 

Corn futures on China's Dalian Commodities exchange settled higher with May 2007 up RMB/10 at RMB/1,393/tonne.