November 3, 2009

 

CBOT Corn Outlook Tuesday: Lower in correction from Monday's surge

 

 

Chicago Board of Trade corn futures are expected to open weaker Tuesday as the market gives back some gains from Monday's late surge, traders said.

 

Corn is called 4 to 6 cents lower. In overnight trade, December corn was down 4 1/2 cents to US$3.77 3/4 per bushel and March corn was down 4 3/4 cents to US$3.91.

 

Traders said Monday's rally was overdone. Prices climbed 16 to 18 cents, with most of the gains coming late in the session as funds were heavy buyers. Funds bought an estimated 14,000 contracts, with ADM Investor Services noted as a key buyer.

 

"We did some technical work yesterday," a trader said. "It might be a buy-the-break mentality all of a sudden."

 

But there's little current fundamental news to support such gains, traders said.

 

Although the harvest remains far behind schedule, a drier weather pattern has emerged that should allow farmers to get into the fields.

 

DTN Meteorlogix calls for dry conditions with only a few light showers in the U.S. corn belt through Saturday.

 

There is a corrective tone in outside markets, traders said, as a stronger dollar and weaker crude oil weigh.

 

The U.S. Department of Agriculture reported that only 25% of the crop was harvested as of Sunday, up from 20% the prior week but way below the five-year average of 71%. Traders were expecting between 24% and 28%.

 

The trade is starting to look ahead to updated supply and demand estimates, which the USDA will release Nov. 10 at 8:30 a.m. EST. Some are expecting the USDA to increase the projected crop size, as the historical tendency is for gains between the September and October reports to be extended into November.

 

Others say that lousy weather to end the season could mean a smaller estimate.

 

Either way, "waning interest in next Tuesday's output numbers reflects the market's increased pre-occupation with the demand side of the equation, and in that regard the situation is less than auspicious," Western Milling analyst Joel Karlin said in a weekly newsletter.

 

Traders point out that export sales have been weak recently, and feed demand continues to struggle, although ethanol demand remains strong.

 

Technically, the market had a bullish "outside day" up on the daily bar chart Monday, after hitting a fresh four-week low early on, a technical analyst said.

 

The next upside price objective is to push and close prices above solid technical resistance at US$3.88 3/4 a bushel, the technical analyst said. The next downside price objective for the bears is to push and close prices below solid technical support at Monday's low of US$3.59 1/4 a bushel.

 

First resistance for December corn is seen at Monday's high of US$3.83 3/4 and then at US$3.88 3/4. First support is seen at US$3.75 and then at US$3.70.