August 17, 2007

 

CBOT Corn Outlook on Friday: Mixed opening seen after fed cuts rate

 

 

Chicago Board of Trade corn futures are expected to open mixed Friday after the U.S. Federal Reserve's decision to cut the discount rate by 50 basis points this morning, analysts said.

 

In overnight electronic trading before the Fed's announcement, September corn fell 4 cents to US$3.17 1/2 per bushel and December declined 4 1/2 cents to US$3.34 1/2. E-CBOT volume in December was 5,137 contracts.

 

Corn is expected to open mixed, an analyst said. The outside markets are all higher following the Fed's decision to cut rates, but the market did not trade its fundamentals but money flow and fear Thursday and that will remain the feature Friday, the analyst said.

 

The Fed said it cut the discount rate by 50 basis points Friday morning "to promote the restoration of orderly conditions in financial markets."

 

Given the Fed's decision to cut rates the corn market could see some short covering ahead of the weekend and after the recent weakness, a floor trader said. However, market direction will depend on the financial markets and what direction they move.

 

Ahead of open auction trading equity indices are up with energy and metals markets also higher on the Fed news.

 

Increasing rainfall will continue to favor filling crops in areas from Iowa northward and from northern Illinois northward during the next several days, DTN Meteorlogix Weather said.

 

In the western U.S. Midwest, periods of showers and thunderstorms in northern areas are expected during the weekend with rainfall potential 0.50-1.50 inches and locally heavier mostly in South Dakota and Minnesota but including northeast Iowa, Meteorlogix said. The balance of the region should expect only isolated thunderstorms. Temperatures are expected to average near-to-below normal north and above-normal south.

 

In the eastern U.S. Midwest there is a chance for scattered shower and thunderstorms with amounts of .30-1.50 inches in northern and northeast areas during the weekend. The rest of the region will have only isolated activity during the weekend. Temperatures are expected to average below normal north and above normal south during this time.

 

In the 6-to-10 day forecast, temperatures are expected to average near-to-below normal northwest and near-to-above normal southeast. Rainfall is expected near-to-above normal west and north and near-to-below normal southeast.

 

On daily technical charts, December corn gapped open lower Thursday on the daily bar chart and hit a fresh four-week low before rebounding to close near the session high, a technical analyst said. Some near-term chart damage occurred but a rebound in prices Friday will repair it, the analyst said. Market bulls are fading and need a close above US$3.50 in December to regain fresh upside momentum, he said. The next downside price objective for the bears is closing prices below solid support at the July low of US$3.24 1/2.

 

First resistance for December corn is seen at US$3.41 1/2, which would fill on the upside Thursday's downside price gap on the daily chart, and then at US$3.45. First support is seen at US$3.36, and then at US$3.30.

 

In other corn news, Nonghyup Feed bought 55,000 metric tonnes of optional-origin corn from Bunge in a tender concluded Thursday, an official from the South Korean company said Friday.

 

Argentina will plant 3.9 million hectares of corn in 2007-08, up 9% from the 3.57 million hectares planted in 2006-07, the country's Agricultural Secretariat said in its monthly crop report Thursday.

 

Corn futures on China's Dalian Commodities Exchange settled lower with the May contract down RMB/10 at RMB1,556 per metric tonne.