November 13, 2009

 

CBOT Corn Outlook on Friday: Mixed as trade eyes quality concerns

 

 

Chicago Board of Trade corn is expected to open mixed Friday following two-sided trade overnight amid concerns about the quality of the crop.

 

In overnight trade, December corn was down 1/2 cent to US$3.90 per bushel and March corn was down 1/2 cent to US$4.05.

 

The market had been initially lower in overnight trade amid follow-through selling, but rebounded as the dollar weakened, analysts said. Outside macro markets aren't providing a strong direction Friday, traders said.

 

Thursday's slide was attributed to concerns about vomitoxin from the corn showing up in distiller dried grains, a byproduct of ethanol used in animal feed. Soymeal and soybeans, which could see more demand if hog producers have to switch away from corn, climbed on the day.

 

The extent of any problem is "tough to get your arms around," a trader said. "It's probably not going to go away in a hurry."

 

Traders and analysts said the problem was reported in the eastern corn belt, but not the west. But some traders and analysts said that while quality is a legitimate concern, it might not justify Thursday's price action.

 

"The problem with all of this vomitoxin talk is that there really is not a problem yet," Tomm Pfitzenmaier, analyst at Summit Commodity Brokerage in Des Moines, said in a morning commentary.

 

Weekly export sales were relatively weak. The U.S. Department of Agriculture reported net sales of 488,500 metric tonnes, down from 571,200 the prior week but up 9% from the prior 4-week average.

 

Some see the lackluster export sales in recent weeks as a sign that U.S. corn prices are uncompetitive and that the market loses demand around US$4. But there are others who say that the weaker export sales are merely a result of the delayed harvest, and that sales will pick up again as harvest gains momentum and the supply pipeline is filled.

 

Recent harvest progress is weighing on the market, but forecasts for next week call for wet weather that could stall harvest in parts of the U.S. corn belt.

 

The next upside price objective is to push and close prices above major 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 the November low of US$3.59 1/4 a bushel.

 

First resistance for December corn is seen at Thursday's high of US$3.98 1/4 and then at US$4.00. First support is seen at US$3.85 and then at Thursday's low of US$3.82 1/2.