October 1, 2008

 

CBOT Corn Outlook on Wednesday: Up 3-5 cents on overnight gains; market oversold

 

 

Chicago Board of Trade corn futures are expected to open 3 to 5 cents higher Wednesday following overnight gains.

 

In an overnight trading bounce after recent losses, December corn rose 7 1/4 cents to US$4.94 3/4 and March corn rose 6 cents to US$5.12 1/2 per bushel.

 

After dropping more than 55 cents in two days, "we're more commodity neutral here this morning," said Don Roose, president of U.S. Commodities in West Des Moines, Iowa. The trade is "handcuffed" as markets anticipate a U.S. Senate vote on a bailout package for the financial sector this evening, he said. Concern about the world economy and equities markets has weighed on commodities recently.

 

Traders and analysts said the market is oversold after the losses to start the week. Prices in the December contract plunged below US$5 Tuesday for the first time since January.

 

Late selling Tuesday pushed prices toward key support around US$4.85 in December, which Farm Futures called in a morning commentary "a level that needs to hold to avoid a shift to a negative technical pattern suggesting the death knell for the bull market."

 

The direction of the market will most likely depend on outside factors rather than corn fundamentals, Farm Futures added.

 

Analysts also noted bearish fundamental influences, however. As it did for most of September, weather looks good for the crop in early October.

 

The DTN Meteorlogix forecast calls for no significant cold weather in the U.S. corn belt during the next 10 days, allowing crops to mature slowly. "Any chance for wet weather slowing harvests is mostly in the west and mostly late in the 10-day period," according to the forecast.

 

Tuesday's quarterly grain stocks report from the U.S. Department of Agriculture was also bearish, traders and analysts said. It increased fourth-quarter stocks to 1.624 billion bushels, up 48 million bushels from an earlier estimate.

 

Roose said the report showed there is more of a supply cushion than the trade thought, but that corn is "still going to have to fight for acres."

 

The next downside price objective is to push and close prices below solid technical support at the January low of US$4.83 3/4, a technical analyst said. The next upside price objective is to push and close prices above resistance at the August low of US$5.04 1/2.

 

First resistance for December corn is seen at US$4.95 and then at US$5.00. First support is seen at Tuesday's low of US$4.85 1/2 and then at US$4.83 3/4.