October 20, 2009

 

CBOT Corn Outlook on Tuesday: Down slightly amid profit-taking

 

 

Chicago Board of Trade corn futures are expected to open a little weaker Tuesday amid some modest profit-taking following Monday's strong gains.

 

In overnight trade, December corn was down 1 1/4 cents to US$3.85 per bushel and March corn was down 1 cent to US$3.97.

 

The market had climbed almost 15 cents Monday, and overnight trade reflected profit-taking, traders said. But they said lousy weather and a weaker U.S. dollar -- factors that have prompted recent gains -- remain supportive.

 

Harvest progress remains extremely slow. The U.S. corn harvest was 17% complete as of Sunday, up just four percentage points from a week earlier and below the average of 46%, the U.S. Department of Agriculture said. That was at the low end of trade expectations, as some expected progress to be above 20%. The progress is at or near a record-slow pace, traders and analysts said.

 

The slow progress is raising concerns about the strength of this year's crop, although it's still expected to be large at around 13 billion bushels.

 

"The yields remain very good," a trader said. "It's quality issues that are raising concerns."

 

Weather forecasts into next week show little chance for farmers to get their combines rolling, traders said.

 

DTN Meteorlogix meteorologist Joel Burgio said in a forecast that rains will return Wednesday and Thursday to the U.S. Midwest, and will be "possibly heavy in some sections." Traders are also eying forecasts calling for more rain, and lousy harvest weather, into next week.

 

"Next week's weather is more uncertain today but I could easily see more rain and cool conditions developing," Burgio said.

 

Many traders and analysts say that the market's fundamentals should not support prices approaching US$4. The rally is "definitely not demand-driven," a trader said.

 

"Fundamental traders remained perplexed and on the sidelines," Benson Quinn Commodities analyst Kevin R. Kjorsvik said in a market commentary.

 

Technically, December corn closed at a fresh 3 1/2-month high Monday. The next upside price objective is to push and close prices above psychological resistance at US$4.00 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 last week's low of US$3.61 3/4 a bushel.

 

First resistance for December corn is seen at last week's high of US$3.88 3/4 and then at US$3.95. First support is seen at US$3.80 and then at US$3.75.

 

A trader also noted that no evidence existed Monday of the much-anticipated liquidation of contracts by Deutsche Bank, expected to start Monday.

 

The bank was expected to liquidate roughly 20,000 contracts.

 

"That may turn out to be much ado about nothing," the trader said. "They may have already done it last week and nobody noticed."