August 24, 2007

 

CBOT Corn Outlook on Friday: Flat to down 2 cents; consolidating, overbought

 

 

Chicago Board of Trade corn futures are seen starting Friday's day session with a steady to lower undertone, as overbought market conditions have futures displaying signs of exhausted buying interest, analysts said.

 

Analysts expect corn to open flat to 2 cents lower.

 

In overnight electronic trading, September corn was 3/4-cent lower at US$3.44 1/2, and December corn was 1- cent lower at US$3.61.

 

The market is poised for some light consolidation amid overbought conditions, but the market will keep a watch on wheat for spillover momentum, said Jason Roose, analyst with U.S. Commodities in West Des Moines, Iowa.

 

Light pressure is expected from cash basis levels backing off, as better than expected yields are reported from early harvest activity in the southern crop belt, Roose added.

 

Nevertheless, concerns over potential crop losses from upper Midwest floods and strong underlying demand remain underpinning features to limit downside potential, analysts added.

 

A technical analyst said Thursday's price action did produce a mini buying exhaustion tail on the daily bar chart, whereby the bulls became exhausted at higher price levels and then prices backed well off the high to close near the session low.

 

Now, Thursday's high of US$3.72 basis the December contract is strong overhead resistance for the bulls to overcome. The next upside price objective is to close December futures above solid resistance at Thursday's high of US$3.72. The next downside price objective is to close prices below solid support at US$3.50.

 

First resistance for December corn is seen at US$3.65 and then at US$3.70. First support is seen at US$3.60 and then at US$3.57 3/4.

 

Crop scouts from the western and eastern legs of the John Deere/Pro Farmer U.S Midwest crop tour met Thursday evening in Owatonna, Minn., to discuss their observations. Minnesota's estimated corn yields are above last year's tour observations. Tour officials estimated the Minnesota corn crop at 154.24 bushels per acre, up 2.7% from the 150.15 bushels per acre the tour observed in 2006. Iowa's corn yield is down from last year but is on par with expectations as west-central areas look to rebound from a poor performance last year.

 

Pro Farmer pegged Iowa's average corn yield at 152.15 bushels per acre, down about 4%-5% from last year's crop tour and also down from the U.S. Agriculture Department's Aug. 1 projection of 180 bushels.

 

Pro Farmer will issue its total Midwest corn yield and average soybean pod count on Friday at 2:30 p.m. EDT.

 

The DTN Meteorlogix Weather Service forecast said another day with possible heavy storms and some flooding concerns are on tap for the northern Midwest Friday. This time a little south and east of where it was Thursday. Rain has been added to the forecast for central Illinois and Missouri. In this case this would be favorable, since this area did not have the heavy rains of the past week, Meteorlogix reports.

 

In overseas markets, corn futures traded on the Dalian Commodity Exchange settled lower. The benchmark May 2008 contract settled down RMB9 at RMB1,581/tonne.