November 20, 2009

 

CBOT Corn Outlook on Friday: Outside markets seen pressuring prices

 

 

Bearish signals from outside markets are expected to put Chicago Board of Trade corn futures on the defensive early Friday after prices dipped overnight.

 

Corn is called to open 2 to 5 cents per bushel lower. In overnight electronic trading, December corn sagged 3 1/2 cents to US$3.91 1/2 a bushel, and March corn dipped 3 1/2 cents to US$4.17.

 

Outside markets are the "big feature" for the grains, with traders watching lower crude oil prices and the firmer U.S. dollar, said Rich Nelson, director of research at Allendale. There is a lack of fresh fundamental news out ahead of the weekend, he said.

 

"We don't see a whole lot of changes for weather," he said.

 

A drying trend in the U.S. Midwest will help to improve field conditions for corn harvesting through Sunday, according to private weather firm DTN Meteorlogix. However some rain is possible early next week and cooler conditions may arrive at the end of the week, which would be unfavorable for harvest activities and for drying of corn, the firm said.

 

Traders continue to wait for word from the CME Group, parent of the CBOT, about new corn contract specifications regarding vomitoxin, a fungal byproduct. The exchange has said it may announce the new specifications this week.

 

Quality has been a concern for the corn crop for weeks due to a wet growing season, but worries intensified late last week amid reports that some hog producers were rejecting dried distiller grains, an ethanol byproduct used for feed, because of vomitoxin concerns. The vomitoxin specifications would be a first for the corn contract.

 

CBOT corn closed slightly lower Thursday on pressure from a stronger dollar, weaker crude oil and poor demand. Bulls still have the overall near-term technical advantage and do not want to see a bearish weekly low close Friday, a technical analyst said.

 

Bulls' next upside price objective is to push and close March corn above solid technical resistance at this week's high of US$4.25, the analyst said. The next downside price objective for the bears is to push and close the contract below major psychological support at US$4.00, he said.

 

First resistance for March corn is seen at Thursday's high of US$4.16 and then at US$4.18, the analyst said. First support is seen at Thursday's low of US$4.05 1/2 and then at US$4.02 1/2, he said.

 

The US$4 level "appears to be a glass ceiling" for the December contract, said Bryce Knorr, analyst for Farm Futures. December corn options expire Friday, and some "20,000 December US$4 calls are still kicking around, presenting a formidable challenge," he said.

 

"The US$4.00 strike in the corn market will hold sway over prices tomorrow as there are significantly more calls open than puts," Country Hedging said in a market comment.