April 9, 2007

 

CBOT Corn Outlook on Monday: Up 12-15 cents; midwest weather to underpin

 

 

Chicago Board of Trade corn futures are seen starting Monday's day session sharply higher, fueled by price strength in overnight trade amid weather forecasts that could delay spring plantings, traders said

 

Analysts expect corn to open 12 to 15 cents higher.

 

In overnight electronic trading, May corn finished 13 1/2 cents higher at US$3.79 1/2, and December corn was 12 1/2 cents higher at US$3.99 1/4.

 

Weather is and will be the key influence on prices Monday, as the need for record crops in 2007 is placing a great importance of plantings getting off to a normal start for optimal yield potential, analysts said.

 

Forecasts through April 18 look to have below-normal temperatures and above-normal precipitation, Midwest Market Solutions Brian Hoops wrote in a market letter. This indicates very little fieldwork will be done through April 18, as at least three storm systems can move into Midwest over the next 10 days, brining heavy rain showers, he writes. The normal U.S. planting pace is to have 50% of the corn seeded by April 25, and this weather forecast will narrow the optimum planting window for corn, forcing premium into prices, Hoops added.

 

Otherwise, technical influences will add to the bullish tone, with traders looking for buy stops to be activated as price push through overhead resistance levels, traders added.

 

The DTN Meteorlogix Weather Service forecast said mainly dry conditions are on tap for the western Midwest on Monday, with a chance for light or locally moderate precipitation Tuesday. Drier weather returns Wednesday, with temperatures averaging below normal during this period. Rain develops Thursday or during Thursday night, with rain and thunderstorms or even snow before ending during Friday night or early Saturday.

 

In the eastern Midwest, conditions will be mainly dry Monday and early Tuesday, with a chance for showers, later Tuesday or Wednesday. Temperatures will average below normal during this period. There is a chance for a little light rain or drizzle later Thursday, and a chance for thunderstorms or rain during Friday and Saturday. The rain may mix with or change to snow before ending Saturday night, Meteorlogix forecasts.

 

The Meteorlogix 6-10 day forecast calls for temperatures across the Midwest to average near to below normal, with precipitation near to above normal south and east, and near to below normal northwest.

 

A technical analyst said Thursday's strong close is a solid technical clue that a near-term bottom in the market has been posted. The next downside price objective for May futures is producing a close below solid chart support at last week's low of US$3.43. The market would begin to gain better upside technical momentum by pushing prices above solid chart resistance at US$3.75.

 

First resistance for May corn is seen at Thursday's high of US$3.67 1/4 and then at US$3.70. First support is seen at Thursday's low of US$3.60 and then at US$3.55.

 

The Commodity Futures Trading Commission on Friday reported in its supplemental commitment of traders report that index funds were reported to hold net long positions totaling 346,576 combined corn futures and options contracts as of April 3, down from 367,942 the prior week. Traditional large speculative traders were net long 153,342 contracts and commercials were reported to hold net short combined futures and options positions totaling 423,852 contracts.

 

In other news, the accelerating growth of China's domestic corn demand may turn it into a relatively tight-supply country from a basically balanced market, a senior government official said Monday. The official's comment on the supply and demand situation of a particular agricultural commodity, which is rare, followed market speculation beginning early last year that China will turn into a net corn importer in a few years on strong growth in domestic demand.

 

In overseas markets, corn futures traded on the Dalian Commodity Exchange settled sharply higher, as market talk about the release of corn export quotas and a government official's comment about relatively tight supply Monday drove prices higher, analysts said. The benchmark September 2007 contract rose RMB20 or 1.2% to settle at RMB1,688/tonne, after trading between RMB1,672 and RMB1,700/tonne.