December 15, 2009

 

CBOT Corn Outlook on Tuesday: Lower on dollar; corrective tone

 

 

Chicago Board of Trade corn futures are expected to open weaker Tuesday amid a stronger dollar and lack of fundamental support.

 

Corn is called 2 cents to 4 cents lower. In overnight trade, December corn was down 3 1/2 cents to US$4.05 per bushel and May corn was down 3 1/2 cents to US$4.15 3/4.

 

Traders say that a stronger dollar could set the tone and halt recent upside momentum. The market climbed Monday thanks to speculative buying, analysts said. A couple traders said corn's recent strength--the March contract has gained 25 cents the past three sessions--might be "overdone," leading to a correction.

 

The market has also been getting a boost from expectations that index fund rebalancing at the start of the new year will be bullish. A trader cautioned that this factor might be "so well-advertised" by the time it actually happens that prices could see little boost.

 

Monday's crop progress report from the U.S. Department of Agriculture confirmed that there was little harvest progress in the previous week. The USDA said that the corn harvest was 92% complete as of Sunday, up from 88% the prior week. There is no prior year-average to compare to, as the harvest is typically complete by this time of year.

 

Traders were expecting around 92% to be harvested, although estimates varied from 90% to 95%.

 

The Illinois crop is 90% complete, compared to the average of 100%; Iowa is 96% complete, and Wisconsin's harvest is only 85% complete.

 

As it becomes apparent that some of the corn could remain in the field through the winter, the market is looking at the demand side, which is bearish for corn, traders said.

 

Bulls have regained fresh upside technical momentum the past three sessions, a technical analyst said. The next upside price objective is to push and close prices above strong technical resistance at the November high of US$4.25 a bushel. The next downside price objective for the bears is to push and close prices below solid technical support at last week's low of US$3.79 a bushel, the technical analyst said.

 

First resistance for March corn is seen at Monday's high of US$4.10 and then at US$4.15, the technical analyst said. First support is seen at US$4.05 and then at US$4.00.