July 2, 2008

 

CBOT Corn Outlook on Wednesday: Down slightly on overnight losses

 

 

Chicago Board of Trade corn futures are expected to open 2 to 4 cents lower Wednesday following overnight losses, but this week's long liquidation may be nearing an end, analysts said.

 

In overnight trading, July corn was down 3 1/2 cents to US$7.16 per bushel, September was down 3 1/4 to US$7.29 and December was down 2 3/4 to US$7.49 1/4.

 

Prices have fallen almost 40 cents since Monday, when the government released planted acreage and quarterly stocks numbers that exceeded analysts' expectations.

 

"I think we're starting to find a bottom," said Shawn McCambridge, senior grains analyst with Prudential-Bache in Chicago. "It seems like the long liquidation is starting to lose its steam a little bit."

 

He said corn prices were several cents higher for part of the overnight session.

 

Mostly dry weather forecasts have pressured prices this week, and the current weather forecast is mostly "benign," analysts said.

 

Despite historic flooding in parts of the Midwest in June, most of the crop will continue to need timely rainfall throughout the summer, analysts said. The worst-case scenario, McCambridge said, is a long period of hot, dry weather, because the crop has shallow root systems this year that will be unable to tap into moisture deep in the soil.

 

The DTN Meteorlogix forecast calls for scattered showers and thunderstorms on Wednesday totaling 0.25 to 1.00 inches, with locally heavier amounts, through eastern and southern Iowa, northern Missouri and southeast Nebraska.

 

Parts of the eastern Midwest will see scattered showers and thundershowers totaling between 0.30 and 1.50 inches, with locally heavier amounts, Wednesday into Thursday.

 

The daily trading limit will be 30 cents Wednesday, down from 45 cents Tuesday. July will continue to trade without a daily limit, however, because it is in delivery. Deliveries against July contracts were reported Wednesday morning at 887 contracts, down from 1,504 contracts Tuesday.

 

The bulls' next upside price objective is to push and close December prices above solid technical resistance at US$7.75, a technical analyst said. The next downside price objective for the bears is to push and close prices below solid support at Tuesday's low of US$7.35 3/4.

 

First resistance for December corn is seen at Tuesday's high of US$7.55 1/2 and then at US$7.60. First support is seen at US$7.50 and then at US$7.38.

 

Despite this week's bearish U.S. Department of Agriculture reports, analysts said the crop is still not out of the woods, and that world supplies will remain tight.

 

McCambridge said the market will be reluctant to give up much of its gains during June, and that favorable weather will remain key for the next 45 days.

 

Global corn output is expected to fall 2% on the year in 2008-09 to 771 million metric tonnes due to flooding in the U.S. Midwest and frost in Brazil, Rabobank said in a report Wednesday.

 

The report said world corn production will lag demand in 2008-09, leading to a 9% contraction in corn stocks, plunging them to the lowest level in 35 years.
   

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