August 29, 2008

 

CBOT Corn Outlook on Friday: Down slightly on weather; cautious trade

 

 

Chicago Board of Trade corn futures are expected to open slightly lower Friday on ample moisture in parts of the U.S. corn belt, which is boosting the outlook for the crop, analysts said.

 

Corn is called 2-4 cents lower. In overnight trading, September corn was down 2 1/2 cents to US$5.67 1/2, December corn was down 3 3/4 cents to US$5.84 and March corn was down 2 3/4 cents to US$6.04.

 

Parts of the northern and northwest corn belt saw healthy rainfall this week, and weather forecasts are calling for more rain next week, analysts said.

 

Position-squaring and cautious trading will likely characterize Friday's activity, traders said, given that it is the last day of the month and precedes a three-day Labor Day Weekend, analysts said.

 

Friday is first notice day, and there were 636 deliveries reported against the September contract. That was at the low end of expectations, as analysts mostly predicted between 500 and 1,000 deliveries, with some as low as 300 and others as high as 1,500.

 

Adding to Friday's cautious tone is Tropical Storm Gustav, which is expected to hit the U.S. Gulf coast early next week. Analysts see a variety of possible effects on the market, including damage to the region's oil infrastructure, which could cause crude oil prices to climb.

 

With the storm bearing down on oil and gas facilities, traders "likely won't want to take home a whole lot of risk in any market," Farm Futures said in a morning commentary.

 

The storm could damage the corn crop near the Gulf, but it also could lead to some beneficial rain across the corn belt, analysts said.

 

"You come here Tuesday, who knows what we'll have?" a trader said.

 

The market was higher in overnight trading before ending lower. A trader said the market "lacks conviction" currently, and that choppy trade will likely continue.

 

The DTN Meteorlogix forecast calls for a warm weather pattern during the next 5 to 7 days in the Midwest, with wet weather in the northwest Midwest. There will be no significantly cool weather during that time, according to the forecast.

 

The trade is looking at forecasts for any sign of an early frost, which would be especially damaging this year because the crop was planted late and needs more time to reach its full yield potential.

 

The next upside price objective is to push and close prices above solid technical resistance at US$6.00, a technical analyst said. The next downside price objective is to push and close prices below solid technical support at the July low of US$5.62 3/4.

 

First resistance for December corn is seen at US$5.95 and then at Thursday's high of 5.97 1/2, the technical analyst said. First support is seen at Thursday's low of US$5.81 1/4 and then at US$5.75.