December 18, 2008
CBOT Corn Outlook on Thursday: Up 3-5 cents on continued dollar weakness
Chicago Board of Trade corn futures are expected to open 3 to 5 cents higher Thursday following overnight gains and continued weakness in the U.S. dollar, analysts said.
In overnight trading, March corn was up 5 cents to US$3.94 1/2, May corn was up 4 1/2 cents to US$4.05 and July corn climbed 4 cents to US$4.15 per bushel.
Prices dipped initially in overnight trade but rebounded as the dollar continues to sag, traders said. Corn has shown continued strength despite a demand outlook that remains bleak because of the global economic downturn.
"One has to be impressed with a market that can rally US$.98 off its lows in a matter of eight sessions with the fundamental picture we are looking at," Jon Michalscheck, analyst with Benson Quinn Commodities, wrote in a market commentary.
Weekly export sales, reported by the USDA Thursday morning were a reminder of the weak demand, a trader said. Net export sales were reported at 612,500 metric tonnes, down from 1.058 million metric tonnes the prior week. Trade estimates were between 450,000 and 800,000 metric tonnes.
"You see what happens when corn starts to rally," the trader said of the lower export sales.
Corn's rally, coupled with crude oil's recent weakness, is reinforcing "highly negative ethanol margins," a trader said, which could further hurt demand for corn.
The market's rally has been fueled in part by estimates from Informa Economics last week projecting a cut in corn acreage and increase in soybean acreage in 2009. Some traders said the market may have overreacted to the report. Country Hedging notes that Barclay's Capital expects both corn and soybean acreage to drop next year.
The next downside price objective is to push and close March prices below solid technical support at this week's low of US$3.70 1/4, a technical analyst said. The next upside price objective is to push and close prices above solid technical resistance at of US$4.16 3/4.
First support for March corn is seen at Wednesday's low of US$3.81 3/4 and then at US$3.75. First resistance is seen at Wednesday's high of US$4.02 3/4 and then at US$4.10.