October 1, 2009

 

CBOT Corn Outlook Thursday: Down 1-2 cents on crop, outside pressure

 

 

Chicago Board of Trade corn futures are expected to open slightly lower Thursday on outside market pressure and the large crop that is looming.

 

Corn is called 1 to 2 cents lower. In overnight trade, December corn was down 1 cent to US$3.43 per bushel and March corn was down 3/4 cent to US$3.56.

 

A weaker dollar is weighing on crude oil and other commodities, traders said, and could set the early tone.

 

Fundamentally the market has little to support it. A bearish crop is expected this season, and those expectations were bolstered Wednesday afternoon by another large private estimate.

 

Commodity brokerage firm FCStone on Wednesday said it estimated U.S. corn production at 13.064 billion bushels, with an average yield of 163.3 bushels per acre. The estimates are up from Sept. 1 projections of 13.02 billion bushels with a yield of 162.7 bushels per acre.

 

Traders are watching the weather in the corn belt and noted cold temperatures overnight into Thursday, with temperatures in the low-30s throughout parts of Ohio and Indiana, as well as Wisconsin and Michigan.

 

The trade has been worried that an early frost could damage this year's late-developing crop, but some traders say that it isn't that early any more.

 

"It's already October today," a trader said. "The window's closing on that pretty quick."

 

Wet weather throughout the Midwest is also an issue, with views mixed as to whether that is underpinning the market. One trader said that at the least, it has reduced the "sell pressure" from the harvest temporarily.

 

Export sales were strong, with weekly net sales of 1.22 million metric tonnes reported Thursday. That is above trade guesses of 550,000 to 900,000 metric tonnes, and higher than the previous week's total of 673,300.

 

"It shows we can export corn even though we incurred a little bit of a rally," a trader said.

 

The next upside price objective is to push 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$3.20 a bushel.

 

First resistance for December corn is seen at the September high of US$3.47 3/4 and then at US$3.50, the technical analyst said. First support is seen at Wednesday's low of US$3.35 1/2 and then at this week's low of US$3.29.

 

In other news, the Wall Street Journal reported that Deutsche Bank AG is restructuring its giant PowerShares commodity-tracking funds amid a crackdown by U.S. regulators on holdings of individual commodities.

 

The bank said Wednesday that it will change the composition of the funds to "satisfy position limits" imposed by the Commodity Futures Trading Commission.

 

Positions of corn, sugar and wheat futures in the agricultural fund will be halved.

 

A CBOT trader said that process will happen this month. It could have more of an effect on December 2010 corn, one month where the bank is thought to own much of its corn. Although bearish, the trader said the market hasn't had a "knee-jerk reaction" to the news thus far.