September 16, 2009

 

CBOT Corn Outlook on Wednesday: Lower in correction; frost threat eyed

 

 

Chicago Board of Trade corn futures are expected to open lower Wednesday in a correction from Tuesday's rally, amid weather forecasts seen as a little less threatening to the crop.

 

Corn is called 3 to 5 cents lower. In overnight trade, December corn was down 3 1/4 cents to US$3.43 1/4 per bushel and March corn was down 3 cents to US$3.56 3/4.

 

The market soared on Wednesday, sparked by weather forecasts showing a frost threat in the Midwest for next week. The rally was accelerated by technical momentum and short-covering, as funds bought an estimated 22,000 contracts.

 

While the frost remains an issue, weather models are slightly less threatening Wednesday morning than they were Tuesday, analysts said.

 

WSI AgTrader said in a morning report that one weather model "backed off on the freeze idea in the areas we yesterday pegged for frost late next week." The report said a freeze would now likely be confined to dry areas of Minnesota and Wisconsin, although other areas, such as Iowa and northwest Illinois, would still see frost.

 

U.S. Commodities broker/analyst Dax Wedemeyer said that the trade could handle a freeze that just "nips" North Dakota, Minnesota and Wisconsin. A significant frost in Iowa would have a much bigger impact.

 

"If that doesn't happen then you're still going to look at these big crops getting bigger, and you're going to improve the maturity of the crop too," he said.

 

Most analysts say that without an early frost, the crop will challenge record U.S. output.

 

A key question to Wednesday's market will be whether funds continue their buying spree, analysts said.

 

A technical analyst said that "Key will be if the corn market can show that important follow-through buying interest the rest of this week."

 

The corn bulls' next upside price objective is to push December prices above solid technical resistance at the August high of US$3.76 a bushel, a technical analyst said. The next downside price objective for the bears is to push and close prices below solid technical support at US$3.25 a bushel.

 

First resistance for December corn is seen at Tuesday's high of US$3.47 3/4 and then at US$3.50, the technical analyst said. First support is seen at US$3.40 and then at US$3.37 1/2.

 

A weaker dollar could provide underlying support Wednesday, Wedenmeyer added.

 

In export news, South Korea's Nonghyup Feed is seeking 110,000 metric tonnes of U.S.-origin corn for shipment in February and March in a tender to be concluded at 0800 GMT today, a company official said Wednesday.

 

China's grain authorities sold 1.32 million metric tonnes of corn, or 41.6% of the stock on offer, at a weekly auction of state corn reserves, the National Grain and Oils Information Center said in a statement on its Web site.

 

The average price fetched was RMB1,585/tonne, the statement said. The government had put 3.17 million tonnes of corn up for bids this week.