October 2, 2009

 

CBOT Corn Outlook on Friday: Down 2-4 cents on crop, outside markets

 

 

Chicago Board of Trade corn futures are expected to open lower Friday as bearish outside markets and a large crop keep the market under pressure.

 

Corn is called 2 to 4 cents lower. In overnight trade, December corn was down 3 cents to US$3.37 1/2, and March corn was down 3 1/4 cents to US$3.50.

 

A supportive macroeconomic picture had been underpinning the market, but with equities and crude oil sliding, and the dollar gaining, that support seems to be dwindling, traders said.

 

"Things are starting to melt a little bit in the outsides," a trader said.

 

Fundamentally, the market has little to support it. Expectations of a U.S. crop that will meet or exceed previous records will continue to "cap rallies," AgResource Co. said in a morning outlook.

 

Views of the weather are mixed. Bulls are pointing to rainy Midwestern weather, and its potential to delay harvest, along with cold weather and frost in the extended forecast. Bears say the frost threat is too little, too late to seriously impact what will be a large crop.

 

Analysts say that early yield reports indicate the crop is coming in as advertised - very large.

 

"Early yield indications remain supportive for a near record crop, with the exception of some of the areas of the Eastern Belt that had mudded the crop in this past spring," Benson Quinn Commodities analyst Jon Michalscheck said in a morning commentary.

 

The trade is awaiting the release of crop estimates from private analytical firm Informa Economics. The estimates are expected to be released around 11:30 a.m. EDT, and traders expect that as with the firm's previous estimates, the report will be bearish.

 

Given the bearish supply outlook, many traders and analysts have been surprised the market hasn't slipped further already. One factor limiting losses, they say, is decent export demand. Weekly export sales reported Thursday exceeded 1 million metric tonnes and were well above trade estimates.

 

The next upside price objective is to push prices above solid technical resistance at the August high of US$3.76 a bushel. 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. First support is seen at Thursday's low of US$3.37 1/2 and then at US$3.35 1/2.