December 31, 2008
CBOT Corn Outlook on Wednesday: 5-7 cents Drop on open of final 2008 session
Year-end selling pressure is expected to send Chicago Board of Trade corn futures lower in Wednesday's opening trades.
Corn is called 5-7 cents lower. In overnight electronic trading, CBOT March corn dropped 6 3/4 cents to US$3.89 1/2 a bushel; May corn fell 6 1/2 cents to US$4 and July corn lost 7 1/4 cents to US$4.09 3/4.
But historical averages favor a neutral-to-positive closing price.
"Corn prices settled steady to higher in each of the past six years on the final trading day of the year," said analyst Arlan Suderman, in his Farm Futures market outlook. "Traders will attempt to make it seven years straight today, but they'll need to reverse an expected bearish start to the day if they're going to do so."
"Corn prices drifted lower throughout much of the overnight session, with traders eyeing chart objectives stacked between US$3.60 and US$3.75 on this correction," Suderman added. "Additional selling is expected to pressure the market as we start 2009, before support returns as traders worry about garnering enough acres for next year's crop."
Technical analysis supports ideas of greater downside movement.
"Stochastics and the relative strength index are overbought and are turning neutral-to-bearish, hinting that a short-term top might be in or is near," a market technician said. "Additional weakness on Wednesday would confirm Monday's key reversal down. Closes below the 20-day moving average crossing at US$3.68 1/2 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 Tuesday's US$3.86 low, he said.
Open interest is declining ahead of the year end, but the near record long position of commercial interest stands as a bullish indicator, notes Hackett Money Flow Report author Shawn Hackett.
"With second tightest global stocks-to-usage ratio ever and with the Argentinean corn crop under stress, the corn market cannot afford an error in assigning global planted acres to corn next year," he said, noting prices need to be higher than their current levels to avoid "catastrophic" acreage reductions.
Forecasts of scattered showers continue in South America, but the degree of crop replenishment remains questionable.
"More rain is needed for developing corn," DTN Meteorlogix said.
Showers in some of Argentina's corn-growing regions will continue through Wednesday night, then give way to mostly dry days with near-to-above-normal temperatures, Meteorlogix said.
The U.S. Department of Agriculture will release a series of once-every-five-year verification of crop stocks reports, including a report covering grain and oilseed stocks from 2003-08. The report may include revisions.
Analysts see the report as a wild card and see revisions in corn, soybean and wheat as a real possibility. USDA officials downplay chances of the report containing any major market-shaking information.