February 4, 2009

Chicago Board of Trade corn futures are expected to open slightly higher Wednesday on spillover strength from soybeans and ideas the market is oversold, analysts said.

 

Corn is called 1 to 3 cents higher. In overnight trade, March corn was up 3/4 cent to US$3.62 1/2 per bushel, May corn was up 3/4 cent to US$3.73 1/2, and July corn was up 1 cent to US$3.84.

 

Strength in the soy complex, which has been the leader recently, should set a positive tone for corn early, traders and analysts said. Corn and soybeans have both lost ground Monday and Tuesday, setting the stage for technical short-covering Wednesday.

 

"This type of a bounce isn't too unexpected," said Mike Zuzolo, senior analyst for Risk Management Commodities. "I think it's mainly technical in nature, that we're getting extremely oversold."

 

Healthy rains in Argentina this week have provided much of the recent pressure, but traders say that the corn crop already suffered significant damage and that additional rain will be needed to avoid more damage. A CBOT floor trader said that Cropcast's forecast for Argentina was a little drier Wednesday morning, which also could boost markets.

 

Outside markets appear supportive, or at least neutral, a trader said, as crude oil is higher and equities appear stable.

 

Seasonal forces are weighing on the market, traders said, and the market soon could feel more pressure from farmer selling, a trader said.

 

Demand remains poor for ethanol and feed, analysts said, although a trader noted that ethanol has surged this week despite corn's weakness, which should improve margins for ethanol producers.

 

Zuzolo said Friday's U.S. unemployment numbers will be important for the trade and a signal as to whether demand is likely to pick up soon.

 

In export news, the U.S. Department of Agriculture announced Wednesday private export sales of 116,000 metric tonnes of U.S. corn for delivery to South Korea in the 2008-09 marketing year.

 

The next downside price objective is to push and close March prices below solid technical support at the November low of US$3.52 1/4 a bushel, a technical analyst said. The next upside price objective is to push and close prices above solid technical resistance at US$3.85 3/4.

 

First resistance for March corn is seen at US$3.68 and then at Tuesday's high of US$3.72 1/4, the technical analyst said. First support is seen at Tuesday's low of US$3.56 and then at US$3.52 1/4.