January 7, 2010

 

CBOT Corn Outlook on Thursday: Lower on dollar, China; exports weak

 

 

Chicago Board of Trade corn futures are expected to open weaker Thursday following overnight losses amid a stronger dollar and expectations of reduced Chinese demand.

 

Corn is called 3 to 4 cents lower. In overnight trade, March corn was down 4 cents to US$4.17 3/4 per bushel and May corn was down 4 cents to US$4.28.

 

The market was pressured overnight by China's decision to raise a key lending rate, traders said. The surprising move was a sign that China was going to fight inflation, and could mean less buying of commodities as growth in the country is restrained, analysts said.

 

A floor trader said that the move hit soybeans particularly hard overnight, and "corn and wheat just followed suit." The dollar is stronger, and crude oil weaker, which will add to the pressure on corn, traders said.

 

The market's downside potential will likely be limited, traders said, as there is a reluctance to sell ahead of the key Jan. 12 crop production and stocks reports from the U.S. Department of Agriculture.

 

Traders are also bracing for index fund rebalancing, which is expected late this week into next week, giving prices a boost.

 

Export sales reported Thursday were below expectations. The USDA reported net sales of 364,700 metric tonnes for the week ended Dec. 31, below trade expectations of sales between 400,000 and 750,000. The previous week's sales totaled 772,500 metric tonnes.

 

Traders said the sales were weak, but said the impact on the market could be minimal.

 

"We're not at this price level because of demand," a trader said. "Is it anything new to trade? No."

 

Bulls' next upside price objective is to push and close March prices above strong technical resistance at this week's high of US$4.26 1/4 a bushel, a technical analyst said. The next downside price objective for the bears is to push and close prices below solid technical support at US$3.90 a bushel.

 

First resistance for March corn is seen at Wednesday's high of US$4.22 and then at US$4.25. First support is seen at Wednesday's low of US$4.16 and then at this week's low of US$4.13 1/4.