February 17, 2009

Chicago Board of Trade corn futures are expected to open lower Tuesday following overnight losses as the bearish world economy continues to weigh, analysts said.

 

Corn is called 3 to 5 cents lower. In overnight trading, March corn was down 3 cents to US$3.60 1/4 a bushel, May corn was down 3 1/4 cents to US$3.70 and July corn was down 3 1/2 cents to US$3.79 3/4.

 

The market is poised to follow outside forces, including equities, lower, analysts said. Soybeans, which have been mostly leading the corn market, fell 17 cents overnight and are also expected to weigh.

 

Although recent strong export sales have helped prop up the market, corn does not have anything bullish to rally on, analysts said. Rainfall in Argentina is not supportive to the market, analysts say, and demand is still relatively weak.

 

Technically the market is weak, analysts said, with the March contract having dipped below all of its major moving averages.

 

With Friday the last day for March options trading, there are 21,000 US$3.50 March puts open, which could become a "battleground" if the market stays under pressure, according to Farm Futures.

 

The next downside price objective is to push and close prices below solid technical support at the February low of US$3.55 3/4 a bushel, a technical analyst said. The next upside price objective is to push and close prices above solid technical resistance at the February high of US$3.83.

 

First resistance for March corn is seen at US$3.65 and then at Friday's high of US$3.71. First support is seen at US$3.60 and then at US$3.55 3/4.

 

Some analysts expect the 2008-09 corn carryout, which was left unchanged in last week's U.S. Department of Agriculture supply and demand report, will grow later on.

 

"For corn, the 1.79 billion bushel ending stocks is more than comfortable and with the feed, industrial and export sectors all struggling, many in the trade feel that the final carryout will be in excess of 2 billion bushels," Western Milling analyst Joel Karlin said in a weekly newsletter.

 

On Friday, the Commodity Futures Trading Commission said that speculative funds added 906 contracts to their CBOT corn long positions and cut 975 contracts from their short positions, putting them net short 42,025 contracts.

 

The supplemental commitment of traders report also showed that commercial funds cut 2,279 contracts from their long positions and added 5,112 contracts to their short positions, putting them net short 109,262 contracts. Index funds cut 1,271 contracts from their long positions and cut 1,584 contracts from their short positions, putting them net short 227,643 contracts, the CFTC said.

 

In international news, the Thai government Tuesday approved a 7.36 billion-baht (US$209 million) plan to buy more crude palm oil and corn from the market in a move to shore up domestic prices, Deputy Prime Minister Korbsak Sabhavasu said.

 

Corn purchases will double to 1.5 million metric tonnes at THB8.50 a kilogram and the buying period will be extended from end-February to end-March, the deputy prime minister told reporters.

 

Also, Japanese companies have imported around 1.2 million tonnes of U.S.-origin corn over the past two to three weeks for delivery in the April-June quarter, a Tokyo-based trader said Tuesday.