December 30, 2008
CBOT Corn Outlook on Tuesday: Up 3-5 cents following overnight trend
Chicago Board of Trade corn futures are expected to open to modest gains Tuesday, following the overnight trend.
Corn is called 3 to 5 cents higher, after falling nearly 20 cents under profit-taking pressure Monday. In overnight electronic trading, CBOT March corn gained 5 1/2 cents to US$3.99 a bushel; May corn rose 5 1/4 cents to US$4.09 1/4 and July corn added 5 3/4 cents to US$4.20.
Traders "are cognizant of the need to buy corn acres for the spring [and] the threats of a developing La Nina in the equatorial Pacific, [but] getting profits down in the books before they close out 2008" trumps all these concerns, said analyst Arlan Suderman, in his Farm Futures market outlook.
"They'll closely monitor tensions in the Middle East and the associated implications for the crude oil and currency markets, but their primary focus now shifts to closing out 2008," he added.
Corn prices took the greatest hit as prices deflated in a thinly traded round of profit-taking Monday, Suderman said, noting corn is well-supported at 20-30 cents below current prices if outside markets remain stable.
Despite higher opening calls, technical analysis favors greater downside movement.
"Stochastics and the relative strength index are overbought and are turning neutral, hinting that a short-term top might be in or is near," a market technician said. "Additional weakness on Tuesday would confirm Monday's key reversal down, thereby opening the door for additional weakness into early January. Closes below the 20-day moving average crossing at US$3.66 would confirm that a short-term top has been posted."
The technician marked a 25% retracement level of the July-December decline crossing at US$4.33 1/2 as the bulls' next upside target. He pegged first resistance at Monday's high of US$4.21. First support is the 10-day moving average at US$3.90 3/4, he said.
Traditional speculative funds were net short CBOT corn by 30,526 contracts and index funds are were net long 234,805 contracts as of Dec. 22, according to data released Monday by Commodity Futures Trading Commission.
Forecasts of rain in South America added to the pressures on corn prices Monday, but the degree of crop replenishment remains questionable.
"More rain is needed for developing corn despite some rain during the past weekend," DTN Meteorlogix.
Temperatures are currently near-to-below normal with a chances for a few light showers Tuesday night in southern areas and heavier showers Wednesday around Cordoba, but "hot weather will return by the end of this week and ...may continue into early next week," Meteorlogix said.
In global trading news, China will shortly issue a corn export quota of 500,000 metric tonnes for 2009 to ease the domestic supply pressure, industry participants said Tuesday.
They didn't mention when the issue would be made, but added the government was also likely to issue a wheat export quota of 500,000 tonnes for the year.