December 9, 2009

 

CBOT Corn Outlook on Wednesday: Up 2-3 cents on storm concerns; spread trade

 

 

Chicago Board of Trade corn futures are expected to open 2 to 3 cents higher Wednesday on the harsh weather conditions in the U.S. Midwest.

 

Corn is called 2 to 3 cents higher. In overnight trade, December corn was up 3 1/2 cents to US$3.73 per bushel and March corn was up 3 1/4 cents to US$3.88 1/4.

 

The market is expected to follow through on modest gains from Tuesday, as snow and rain that has fallen in the corn belt early this week gives way to high winds.

 

"A massive winter storm has brought harvest to a screeching halt throughout the Corn-Belt," Country Hedging analyst Steve Wagner said in a morning commentary.

 

Some traders and analysts say the weather is little more than a nuisance that will delay a harvest that was already late anyway. The U.S. Department of Agriculture said that 12% of the corn crop remained unharvested as of Sunday.

 

Other analysts say the high winds could be more than a headache, and knock over some corn remaining in the fields.

 

Corn was the top performer the grains complex Tuesday and could be again Wednesday, with some more unwinding of the corn-soybean spread expected. A trader said that the new crop soybean-corn spread "started to get some attention" when it recently grew to 2.5-to-1, and that there has been profit-taking on the spread since.

 

Another trader added that outside macro markets, such as a weaker dollar and higher crude oil, are pointing the way higher.

 

Traders are looking ahead to Thursday's supply and demand report from the USDA, which will be released at 8:30 a.m. EST. The trade is mostly expecting a slight increase in the 2009-10 projected carryout thanks to weak demand.

 

The bleak demand picture is serving as a cap on any rallies.

 

"Cash markets for corn around the country also remained on the defensive (Tuesday) which continued to give a strong indication that demand was remaining weak domestically as well as on the export front," Benson Quinn Commodities analyst Jon Michalscheck said in a commentary.

 

The bulls next upside price objective is to push and close March prices above major psychological resistance at US$4 per bushel, a technical analyst said. The next downside objective is to push and close prices below solid technical support at the November low of US$3.72 1/2 a bushel.

 

First resistance for March corn is seen at Tuesday's high of US$3.90 1/2 and then at this week's high of US$3.93 1/2, the technical analyst said. First support is seen at Tuesday's low of US$3.82 1/2 and then at US$3.79.