August 17, 2009

CBOT Corn Outlook on Monday: Lower with bearish outside forces, weather

Corn futures at the Chicago Board of Trade are called to open lower Monday morning. The key "outside markets" are in a fully bearish posture for the grain futures early Monday. The U.S. stock indexes are solidly lower, crude oil prices are sharply lower and the value of the U.S. dollar is stronger against the other major currencies.

"Weather is still good" for the late develpment and kernal filling for the Corn Belt corn crop, said Brian Hoops, with Midwest Market Solutions. Weather forecasters say the near-term weather pattern for the U.S. Corn Belt is expected to remain non-threatening. As a result, traders feel a record national average corn yield is definitely within reach, said another grain analyst. "Unless proven otherwise, it will be difficult for the corn market to turn the trend around," the grain analyst said.

The Pro Farmer Midwest Crop Tour kicks off Monday. Crop scouts will begin sampling corn and soybean fields across the Corn Belt. The first official state tour numbers from Ohio and South Dakota will be issued Monday evening. The tour will likely confirm "big yields," said Midwest Marketing Solutions' Hoops.

Corn traders are currently viewing the soybean/corn futures price ratio as "out of whack," said the grain analyst. A traditional ratio is for soybeans to be about 2.5 times the price of corn, but the current ratio is currently around 3.3:1, he said.

In the latest weekly commitments of traders report issued by the Commodity Futures Trading Commission Friday afternoon, large speculators reduced their net short corn futures positions by 5,951 contracts, to 117 394 contracts. Meantime, commercial traders of corn futures reduced their net short futures postions by 4,072 contracts, to 501,906 contracts. The large "index fund" traders did increase their net long positions by 2,126 contracts, to 385,137 contracts.

Technically, December corn on Friday closed at a bearish weekly low close. The bearish weekly low close does now suggest a challenge of the contract low, or below. The bears do still have the solid near-term technical advantage at present. The corn bulls' next upside price objective is to push prices above solid technical resistance at US$3.50 a bushel. 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.