July 3, 2008

 

CBOT Corn Outlook on Thursday: Lower as weather fears ease

 

 

Chicago Board of Trade corn futures are expected to open 5 to 7 cents lower Thursday, with the market seen correcting slightly following Wednesday's late rally.

 

In overnight trading, July corn was down 8 cents to US$7.40 3/4, September corn was down 7 1/2 cents to US$7.53 1/2 and December corn was down 7 3/4 cents to US$7.72 3/4.

 

Long-range weather concerns, which analysts said fueled a furious rally late Wednesday, have eased Thursday, an analyst said.

 

"From our perspective, there were some rumors about hot, dry weather coming in after the Fourth of July," said Don Roose, president of U.S. Commodities in Des Moines. "Here this morning, it looks like there's been an easing back of those theories."

 

A trader said the market may have been overbought after Wednesday's rally, leading to overnight losses. Some buy stops above the market contributed to the rally, a trader and an analyst said. Prices closed almost 30 cents higher Wednesday, climbing more than 10 cents in the final minutes of trading.

 

The market will continue to look for potential weather problems, traders said.

 

Trading activity could be slower Thursday, a trader said, ahead of the long Fourth of July holiday weekend. The CBOT will be closed Friday.

 

The U.S. Department of Agriculture reported net export sales for the week ended June 26 of 628,400 metric tonnes for the 2007-08 and 2008-09 marketing years, compared to 402,849 metric tonnes the prior week. Roose said Thursday's report of 325,892 metric tonnes for old crop was disappointing. Lower export sales signal that historically high corn prices are rationing demand, analysts said.

 

Wednesday's strong rally opens the door to a quick retest of contract highs, a technical analyst said. December's contract high is US$7.99 1/4, reached in overnight trading June 27. Just above that is US$8, which analysts say is a significant psychological threshold.

 

Roose sees some squaring of positions that could pressure prices Thursday, but he said traders won't push prices too much lower because the crop requires perfect weather from here on out.

 

The next upside price objective is to push and close December prices above US$8.00, the technical analyst said. The next downside price objective is to push and close prices below support at US$7.35 3/4, the July 1 low and a key pivot low on the daily chart.

 

First resistance for December corn is seen at Wednesday's high of US$7.82 and then at US$7.93. First support is seen at US$7.55 1/4 and then at US$7.35 3/4.

 

Deliveries against July futures continue to fall, and were reported at 559 contracts Thursday.

 

DTN Meteorlogix calls for showers and thunderstorms in the central and eastern U.S. corn belt Thursday and Friday, with totals up to 0.75 inches both days. The forecast calls for mostly dry conditions, with a few scattered showers or thunderstorms, through Monday.

 

In international news, India's federal government Thursday banned corn exports, effective immediately, in a bid to tame high inflation. Corn prices have risen sharply there in the local markets due to an unprecedented rise in exports from the country, adding to inflationary woes. The ban will be in effect until Oct. 15.