December 16, 2008
CBOT Corn Outlook on Tuesday: Down as recent rally wanes; lack of news
Chicago Board of Trade corn futures are expected to open slightly lower Tuesday as the market's recent rally runs out of steam amid a lack of fresh news.
Corn is called 2 to 3 cents lower. In overnight trading, March corn was down 3 cents to US$3.72 1/4 per bushel, May corn was down 1 3/4 cents to US$3.84 3/4 and July corn was down 3 cents to US$3.94 1/4.
The market continues to track outside markets, but doesn't appear to have any clear direction Tuesday morning, a trader said. After gaining five out of the past six sessions, corn could trade both sides, said Jason Roose, analyst for U.S. Commodities in Des Moines.
"The market is not heavily oversold anymore," Roose said. "We think we may get into more of a holiday trading-range market."
The market has surged on technical strength and concerns about acreage. It also rallied despite a report from the U.S. Department of Agriculture last week increasing ending stocks by 350 million bushels. But analysts say that report still hangs over the market, and serves as a reminder that demand for corn has mostly remained poor.
"In order to break through the psychological resistance area of US$4.00 it will take a shift in trader sentiment," said Kevin Kjorsvik, analyst for Benson Quinn Commodities. "Many traders remain bearish on the demand side of the corn balance sheet."
The corn-soybean spread, which had shrunk the past couple days on concerns that the market needed to buy back some corn acreage, expanded overnight, a trader noted.
Roose noted that there was increased farmer selling during Monday's rally, which helped push prices to the lower end of the day's trading range by the close. Open interest fell, he added.
The trade also is keeping tabs on weather in South America. Major corn-growing areas in Argentina will continue to be hot and mostly dry through Saturday, and "stress to early growing crops is high," according to weather service DTN Meteorlogix.
Bulls will have to show more power very soon to keep their upside momentum, a technical analyst said.
The next downside price objective for the bears is to push and close March prices below solid technical support at US$3.50 per bushel, the technical analyst said. The bulls' next upside price objective is to push and close prices above major psychological resistance at US$4.00.
First resistance for March corn is seen at US$3.80 and then at US$3.85. First support is seen at Monday's low of US$3.71 and then at US$3.65.