November 24, 2009

 

CBOT Corn Outlook on Tuesday: Seen lower on follow-through selling

 

 

Chicago Board of Trade corn futures are expected to start 1 cent to 3 cents per bushel lower Tuesday on follow-through selling from a weak close Monday.

 

In overnight electronic trading, December corn fell 1 3/4 cents to US$3.85 1/2, and March corn slipped 2 cents to US$4.11 1/4.

 

The market sagged overnight after a bearish "outside day lower" Monday, when December corn traded above and below Friday's range before closing weaker, an analyst said. Fund selling and profit-taking that helped pressure prices Monday could return, he said.

 

Bulls' next upside price objective is to push and close March corn above solid technical resistance at the November high of US$4.25, a technical 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 US$4.10 and then at US$4.14. First support is seen at Monday's low of US$4.01 and then at US$4.00.

 

Monday's slump was technically a "bad close," said Mark Gold, managing partner of Top Third Ag Marketing. However, he said he "wouldn't be too concerned" about a bearish outlook unless December corn closes below US$3.80 on Tuesday.

 

MF Global also is keeping an eye on the US$3.80 level. The firm said in a note that "ongoing buoyancy" of the December contract at or above US$3.80 suggests the corn market "is driven more by steady fund buying than by fundamentals."

 

Better-than-expected U.S. corn yields and poor corn export sales are unfriendly fundamentals, MF Global said. They overshadow supportive harvest delays, according to the firm.

 

About one-third of the U.S. corn crop was still in the fields as of Sunday following development delays and harvest delays due to wetness. Harvest was 68% complete as of Sunday, up from 54% a week earlier but down from the average of 94%, according to the U.S. Department of Agriculture.

 

Harvest continued to lag in Illinois, a key growing state, where 60% of the crop was combined, below the average of 98%, according to the USDA. In Wisconsin, harvest was 59% complete, below the average of 87%.

 

"In my 35 years in agriculture I can't remember ever seeing numbers this bad," Gold said. "Traders have to be concerned about quality issues."

 

The CME Group (CME) said Tuesday it won't change the specifications for the Chicago Board of Trade corn contract to reflect concerns about vomitoxin, a fungal byproduct that can sicken animals if ingested. The exchange had said last week it planned to adjust the specifications due to worries that the late harvest and wet weather had impacted crop quality.

 

Wet weather in the Midwest may slow the corn harvest during the next day or two, according to private weather firm DTN Meteorlogix. Drier conditions are expected through the end of the week, and rain or snow next week may cause further problems for the corn harvest, the firm said.