June 27, 2008

 

CBOT Corn Outlook on Friday: Higher on rain, outside markets

 

 

Chicago Board of Trade corn futures are expected to open 6-8 cents higher Friday, after setting new records overnight on rainy weather and strong outside markets.

 

In overnight trading, July corn was up 7 1/2 cents to US$7.61 1/4 per bushel, September corn was up 7 1/4 cents to US$7.75 1/2, and December was up 7 1/2 cents to US$7.95 1/2.

 

July set a new all-time record for nearby corn at US$7.65, while December set a new contract high at US$7.99 1/2.

 

Corn and other commodities are being driven by inflationary concerns, as outside markets such as crude oil, gold and the dollar index provide support, analysts said.

 

"They're just all going to be tied together," said Frank Cholly Jr., senior market strategist with Lind-Waldock.

 

He said commodities have seemed to be either all higher or all lower in recent months. Cholly expects continued momentum Friday on outside markets and crop production concerns.

 

Analysts said traders are putting a weather premium back into the market following heavy rains that have moved across the U.S. corn belt this week. Northern Missouri and much of Iowa have seen multiple inches of rain.

 

The DTN Meteorlogix forecast calls for scattered to widely scattered showers and thundershowers during Friday afternoon and evening, totaling between 0.10 and 0.75 inches, with locally heavier amounts. The heaviest activity will be across the northern half of the region, according to the forecast. The corn belt will see more showers and thunderstorms Saturday afternoon and evening, with amounts between 0.20 and 1.00 inches.

 

The market is awaiting Monday's planted acreage report from the U.S. Department of Agriculture, and uncertainty about the report will limit pre-weekend profit-taking, analysts say.

 

A report showing a substantial reduction in acreage will be seen as bullish. But even if the report doesn't show a sharp drop, traders will assume the USDA was unable to gauge the full effect of the floods, a trader said.

 

Analysts estimate the report will drop acreage to 85.321 million acres, down from 86.014 million acres in the USDA's March report. Estimates from 18 analysts range from 79.614 million acres to 87.399 million acres.

 

In addition to a drop in planted acreage, analysts see a more substantial drop in harvested acreage.

 

"With yields also in jeopardy due to late planting and nitrogen loss, that sets up an explosive supply reduction for 2008 that will require significant rationing," Farm Futures wrote in a morning comment.

 

The bulls' next upside price objective is to push and close prices above major psychological resistance at US$8.00, a technical analyst said. The next downside price objective for the bears is to push and close prices below solid support at US$7.50.