October 13, 2009

 

CBOT Corn Outlook on Tuesday: Steady-down 2 cents; correction, farmer sales

 

 

Chicago Board of Trade corn futures are expected to open steady to slightly weaker Tuesday in a mild correction from recent gains.

 

Corn is called flat to 2 cents lower. In overnight trade, December corn was down 1 cent to US$3.80 1/4 per bushel and March corn was down 1 cent to US$3.92.

 

Some analysts say the market is due for a correction after jumping 39 3/4 cents in the December contract in the past five days. The rally has been fueled in part by technical momentum, and the market closed above its 100-day moving average for the first time since June 17.

 

In addition to technical buying, the rally has been fueled by cold, wet weather in the U.S. Midwest and a weaker dollar. The dollar is again weak on Tuesday, lending a supportive tone to commodities generally.

 

Views are mixed as to how much support that will lend the market Tuesday.

 

"Weather forecasts are drier, showing below normal precipitation over the next week, allowing harvest to progress," Midwest Market Solutions President Brian Hoops said in a morning outlook.

 

Some traders said the weather remains supportive, with the cold and wet conditions offering little if any chance for the crop to dry. Traders and analysts are estimating that the crop has lost between 100 and 200 million bushels due to recent frost, particularly in the northwest corn belt.

 

A floor trader added that the market softened a little late Monday and in the overnight session amid some farmer selling following the sharp rally.

 

Losses could be limited Tuesday by outside markets, including the dollar and stronger wheat and soybeans.

 

At 4 p.m. EDT, the U.S. Department of Agriculture will release its week crop progress report, which was delayed a day because of the Columbus Day holiday. Citigroup expects the government to report 19% of the crop harvested, up from 10% last week but down from the five-year average of 36%.

 

Funds have consistently bought corn and other commodities recently thanks to the weaker dollar and expectations of higher inflation. But Kevin R. Kjorsvik, a Benson Quinn Commodities analyst, notes in a market commentary that "Traders wonder though if it will be enough to support the market when harvest does finally begin in earnest."

 

The corn bulls have gained solid near-term technical momentum and their next upside price objective is to push and close prices above psychological resistance at US$4.00 a bushel.

 

The next downside price objective for the bears is to push and close prices below solid technical support at the December high of US$3.47 3/4 a bushel. First resistance for December corn is seen at Monday's high of US$3.83 1/2 and then at US$3.90. First support is seen at US$3.75 and then at US$3.70.