November 11, 2009

 

CBOT Corn Outlook on Wednesday: Up 2-3 cents on follow-through buying, dollar

 

 

Chicago Board of Trade corn futures are expected to open slightly higher Wednesday on follow-through technical buying and a weaker dollar, analysts said.

 

Corn is called 2 to 3 cents higher. In overnight trade, December corn was up 2 1/2 cents to US$3.97 per bushel and March corn was up 2 3/4 cents to US$4.11 3/4.

 

The market has surged to open the week, and climbed late in Tuesday's session amid a wave of fund-buying that traders said had no clear impetus. Funds bought an estimated 10,000 contracts.

 

A slumping dollar should provide a lift to corn and other commodities Wednesday, traders said.

 

The market does not have strong fundamental backing for recent gains, traders said. Although Tuesday's crop production and carryout estimates from the U.S. Department of Agriculture were considered friendly, the report was seen as a minor factor.

 

"Yesterday's USDA report was largely shrugged off by the market as prices seem to be more driven by investment dollars than by fundamentals," Country Hedging analyst Brian Liedl said in a market commentary.

 

The demand outlook is mixed, as analysts said the USDA's cut in projected exports this year was warranted based on recent weak sales. Ethanol demand remains strong, however.

 

Weather and harvest progress should limit the market's upside potential, traders added, as most areas of the Midwest will get at least another two days of dry weather.

 

A trader noted that so far this week corn's price action has closely mimicked last week's. December corn climbed from US$3.67 to US$3.94 1/2 the first two days of this week, while last week it climbed from US$3.66 to US$3.90 the first two days.

 

But a continuation of the pattern would be bearish, the trader said, as last Wednesday corn opened higher but retreated, and eroded the rest of the week.

 

Corn bulls have the overall near-term technical advantage, and a two-month-old uptrend line is in place on the daily bar chart, a technical analyst said.

 

The next upside price objective is to push and close prices above major psychological resistance at US$4.00 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 last week's low of US$3.59 1/4 a bushel.

 

First resistance for December corn is seen at Tuesday's high of US$3.97 and then at US$4.00. First support is seen at US$3.90 and then at US$3.85.