October 23, 2009

 

CBOT Corn Outlook on Friday: Higher on soggy weather, harvest delays

 

 

Chicago Board of Trade corn futures are expected to open 6 to 8 cents higher Friday as rains promise to delay the sluggish harvest even further.

 

In overnight trade, December corn was up 7 1/2 cents to US$4.11 per bushel and March corn was up 7 1/4 cents to US$4.22.

 

Parts of the corn belt, including Chicago, have been dealing with constant rain showers for the past 24 hours, which is halting harvest work after farmers were likely able to make some progress earlier in the week.

 

Forecasts are calling for more of the same.

 

"Rain, thunderstorms, wind and some snow will likely mean continued harvest delays for the Midwest region during the last part of this week and probably next week as well," DTN Meteorlogix said.

 

As of Sunday, only 17% of the crop was harvested, compared with the average of 46%. The U.S. Department of Agriculture's next weekly crop progress report, to be released Monday afternoon, is expected to show only limited progress.

 

Analysts note that the lack of harvest progress is strangling the pipeline, as demand averages around 1 billion bushels per month.

 

"If it's not being harvested, (the demand) is not being satisfied," said Paul Beere, an analyst with Prime Ag Consultants.

 

Some traders and analysts say the rains are creating quality concerns, although Beere said the problem is not quality, but uncertainty.

 

"You can't quantify a crop until you get it in the bin," Beere said.

 

While harvest delays are a dominant theme in the market, many traders and analysts say that ultimately the rally has a lot to do with the dollar and little to do with fundamentals.

 

A trader said that the rains are a "facilitator" allowing the market to rally on other factors.

 

A weaker dollar has been a key influence in the market's recent strength, but outside markets are seen as a limited influence Friday morning.

 

Bulls' next upside price objective is to push and close December prices above solid technical resistance at US$4.25 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$3.68 1/2 a bushel.

 

First resistance for December corn is seen at Thursday's high of US$4.05 and then at US$4.10. First support is seen at US$4.00 and then at Thursday's low of US$3.93 1/4.