February 3, 2009

Chicago Board of Trade corn futures are expected to open 2 to 4 cents lower Tuesday on a consistently gloomy demand outlook and rainfall in Argentina, analysts said.

 

In overnight trading, March corn was down 4 1/4 cents to US$3.66 1/4 per bushel, May corn was down 4 3/4 cents to US$3.77 and July corn was down 5 cents to US$3.87 1/2.

 

Drought-stricken Argentina received strong rains overnight, analysts said, and more is in the forecast during the next several days. Analysts say much of the damage to the corn crop has already been done, but soybeans can see stronger benefits from the rain. Soybeans have been leading corn in recent weeks, traders said.

 

The gloom surrounding the global economy remains a bearish force for corn and other commodities, analysts said. The market has an "embedded psychology that demand is still falling," Mike Zuzolo, senior analyst for Risk Management Commodities, said in a newsletter.

 

"Rallies are few and have no traction due to continuing announcements of job losses both here in the U.S. and around the world," he said.

 

The likely drop in Argentina corn production has been "more than offset by more signs of reduced consumption in all three main demand sectors," Western Milling analyst Joel Karlin said in a weekly newsletter. The outlook remains poor for ethanol and feed demand, and although export sales have climbed recently, the pace of sales is still well behind average, analysts said.

 

In export news Tuesday, the U.S. Department of Agriculture announced private export sales of 120,000 metric tonnes of U.S. corn for delivery to Egypt in the 2008-09 marketing year.

 

The corn market had been trading in a tight range between moving averages for several days, but ended Monday below all of its major moving averages. Some are expecting a seasonal break in prices during February, although analysts say the damage to the South American crop should limit the extent of the drop.

 

Open interest climbed on Monday's break, which analysts said is a sign that new selling was entering the market.

 

The next downside price objective is to push and close prices below solid technical support at the January low of US$3.58 3/4 per bushel. The next upside price objective is to push and close prices above major psychological resistance at US$4.00.

 

First resistance for March corn is seen at US$3.75 and then at Monday's high of US$3.78. First support is seen at Monday's low of US$3.63 and then at US$3.58 3/4.