December 29, 2009

 

CBOT Corn Outlook on Tuesday: Flat; possible correction; crop supports

 

 

Chicago Board of Trade corn futures are expected to open steady Tuesday after flat overnight trade, with a modest correction possible following recent gains.

 

Prices barely budged overnight and were unchanged at the conclusion of the session. March corn was at US$4.16 per bushel, May corn was at US$4.26 and July corn was at US$4.34 3/4.

 

Corn prices held steady even as wheat and soybeans dipped. A correction in those markets is considered likely Tuesday and could spill into corn. But corn has gained upside technical momentum the past few days, and appears on the verge of a breakout, analysts said.

 

Closes above US$4.24 1/2 or below US$3.77 1/2 are needed to confirm a trading range breakout and point the direction of the next trending move, a technical analyst said. First resistance for March corn is Monday's high of US$4.18 1/2. Second resistance is the reaction high crossing at US$4.21.

 

First support is the 20-day moving average crossing at US$4.01 1/4, the technical analyst said. Second support is the reaction low crossing at US$3.91.

 

Concerns about the 2009 U.S. crop continue to underpin the market, as analysts estimate farmers could lose 100 million bushels of corn due to the late harvest and recent harsh weather.

 

Recent snow will continue to keep farmers out of the field, and the longer the corn stays the more susceptible it is to yield loss, analysts said.

 

The market is getting support from expectations that index funds will add new long positions as part of their rebalancing to start the new year. A trader said that either index funds have already started that process, or other traders are "front-running" and buying in anticipation of the new index fund action.

 

Managed money accounts cut CBOT corn long positions while adding new short positions in the week ended Dec. 22, according to the Commodity Futures Trade commission.

 

The disaggregated commitments of traders report showed that the managed money category cut 1,707 contracts from their long positions, leaving them with 222,614, and added 4,367 contracts to their short positions for a total of 32,999.

 

Meanwhile, the Commodity Futures Trading Commission's supplemental report showed that index funds added 3,625 contracts to their long positions and added 1,224 contracts to their short positions, leaving them net long 376,362 contracts.

 

March corn lost 8 3/4 cents during that time period, but prices have since rebounded.