November 19, 2009

 

CBOT Corn Outlook on Tuesday: Lower as export demand remains weak

 

 

Chicago Board of Trade corn futures are expected to open lower Thursday following overnight losses and weak export sales.

 

Corn is called 4 to 6 cents lower. In overnight trading, December corn was down 5 1/2 cents to US$3.92 1/2 per bushel and March corn was down 5 3/4 cents to US$4.08.

 

Prices started to retreat Wednesday, after failing to challenge the recent high of US$4.13 in the December contract. Prices were seen by some as overbought.

 

The market continues to follow a recent pattern of strong buying early in the week, followed by a setback on Wednesday. A trader questioned how long the pattern can last, saying "it seems too simple."

 

With poor demand and a crop that is expected to be large, many traders and analysts say there's no reason for corn to extend much beyond US$4.

 

Market bears are "convinced that once the speculative money dries up on any given day the bearish fundamentals are quick to kick in and set the market back," Benson Quinn Commodities analyst Jon Michalscheck said in a morning commentary.

 

The weak demand was highlighted again Thursday morning, as the U.S. market continues to suffer from poor export sales. The U.S. Department of Agriculture reported weekly net export sales of 352,900 metric tonnes, down 15% from the prior four-week average.

 

Sales were down from 488,200 metric tonnes the prior week and were at the low end of trade expectations. Analyst guesses had ranged from 350,000 to 600,000 metric tonnes.

 

Higher prices have made the U.S. uncompetitive and helped dry up export demand, according to some traders. Some analysts say the U.S. market could have continued problems if disease concerns with the crop persist. There have been issues with vomitoxin in parts of the U.S. eastern corn belt due to the wet conditions this season.

 

More wet weather is expected next week, which should continue to stretch out the harvest. The drawn-out harvest "could help keep the market underpinned on corrections," a trader said.

 

Despite Wednesday's slip, a technical analyst said that corn bulls still have the overall near-term technical advantage and that a nine-week uptrend line is still in place on the daily bar chart.

 

The next upside price objective is to push and close prices above solid technical resistance at Wednesday's high of US$4.25 a bushel, the technical analyst said. The next downside price objective for the bears is to push and close prices below major psychological support at US$4.00 a bushel.

 

First resistance for March corn is seen at Wednesday's high of US$4.25 and then at US$4.30, the technical analyst said. First support is seen at Wednesday's low of US$4.13 and then at US$4.10.