March 19, 2010

 

CBOT Corn Outlook on Friday: Lower as strong dollar prompts pullback

 

 

Chicago Board of Trade corn futures are expected to open lower Friday as the market pulls back from recent gains on strength in the dollar.

 

Corn is called 2 to 3 cents lower. May corn was down 2 1/4 cents to US$3.73 3/4 per bushel and July corn was down 2 1/4 cents to US$3.84 3/4.

 

The dollar, which continues to strengthen versus the euro, pressured the market overnight and could continue to do so Friday. A stronger dollar makes U.S. exports less attractive, some analysts say, although others say it is bearish for commodities merely because it affects investors' money flow.

 

Prices had been lower for much of Thursday's trade but surged late to post modest gains amid fund-buying. Country Hedging noted in a morning commentary that open interest in corn increased 13,000 contracts the past three sessions as prices have climbed.

 

The increase open interest indicates the market is being driven by new buyers, not just short-covering, traders said. One trader said the new buying is likely coming from end users and index funds.

 

Solid underlying technical support has laid the foundation for recent gains, but traders say the market also has upside resistance as it bumps against key moving averages.

 

Also limiting the upside are large crops in South America. Forecasts of a record soybean production and a healthy corn crop this year have led to Argentina turning into an aggressive seller of both commodities in recent weeks, trading executives said Friday.

 

"Buyers and sellers are wary of possible logistical bottlenecks (such as) workers' strikes or unforeseen government restrictions, and therefore want to ship out as much volume as possible at the earliest," a commodities broker in Buenos Aires said.

 

Traders are eyeing weather forecasts, which are seen as mixed. Pleasant spring weather is being replaced by a storm in parts of the Midwest this weekend, but analysts note that the heaviest rains and snow are expected in southern areas, away from the flooding in the northern corn belt and Plains.

 

Traders are already looking ahead to the March 31 planting intentions report from the U.S. Department of Agriculture. A private analytical firm is expected to release acreage estimates Friday morning after trading opens.

 

Technically, multiple closes above the 20-day moving average crossing at US$3.75 3/4 are needed to help confirm that a short-term low has been posted, a technical analyst said. If May renews this month's decline, February's low of US$3.59 is the next downside target.

 

First resistance is the 20-day moving average crossing at US$3.75 3/4, the technical analyst said. Second resistance is Thursday's high of 3.76 1/2. First support is US$3.61 1/2. Second support is February's low of 3.59.

 

A floor trader said that if prices top Thursday's high of US$3.76 1/2, "you'll definitely see more technical buying."