September 16, 2008

 

CBOT Corn Outlook on Tuesday: Down 10-12 cents; financial markets in focus

 

 

Corn futures on the Chicago Board of Trade are expected to trend lower to start Tuesday's day session, in tune with overnight action, with weakness from outside market influences impacting prices.

 

Analysts expect corn to open 10 to 12 cents a bushel lower.

 

In overnight electronic trading, December corn was 11 cents lower at US$5.51, and March corn was 14 cents lower at US$5.66 1/4.

 

Traders are more concerned with what is happening in the financial community at this point, with a drop of more than US$4.00 in crude oil and a firm U.S. dollar promoting hesitancy in buyers, to start the session, a CBOT floor analyst said.

 

The absence of a decline in weekly crop ratings, a drier weather outlook for the cornbelt with warmer temperatures and a lack of a frost threat are failing to provide incentive for buyers to step in front of a bearish theme, analysts added.

 

However, supportive underlying fundamentals with carryover from Friday's bullish crop report and maturity issues for the 2008 crop are seen limiting losses. End-user buying on price breaks is expected to provide underlying support, with potential for a short covering bounce on any sign of exhausted speculative sales, analysts added.

 

A technical analyst said upside in corn will be limited if the outside markets continue in a bearish posture - meaning lower crude-oil prices and a firmer U.S. dollar. The next upside price objective for December corn is to push and close prices above psychological resistance at US$6.00. The next downside price objective is to push and close prices below solid technical support at US$5.50.

 

First resistance for December corn is seen at US$5.80 3/4, which would fill a downside price gap, and then at US$5.90. First support is seen at US$5.62 3/4 and then at US$5.50.

 

The DTN Meteorlogix Weather Service forecast said heavy weekend rains, some more than 7 inches, may mean flooding of some fields in the region. High winds have also been reported in the region with this rain. Warmer, drier weather during the next five to 10 days should allow fields to recover and crops to advance toward maturity, Meteorlogix said.

 

U.S. Department of Agriculture said 61% of corn was in good-to-excellent condition as of Sunday, unchanged from last week. Traders had expected the rating to decline as much as two percentage points, but some analysts predicted the unchanged rating.

 

The crop was 78% dented, down from 95% last year and the average of 89%, according to the USDA. In Iowa, 71% of the crop was dented, trailing last year's 95% rate and the average of 92%.

 

USDA reported 19% of the crop was mature, far short of last year's 58% and the five-year average of 44%.

 

In other news, Philippine Agriculture Secretary Arthur Yap said Tuesday he will support a proposal made by local corn farmers to increase the government "support price" to keep production from falling amid rising input costs.

 

Price support is the level at which the state-owned National Food Authority buys corn in the local market to support prices during peak harvest season.