July 14, 2008


CBOT Corn Outlook on Monday: Sharply lower on favorable weather



Chicago Board of Trade corn futures are expected to open 20 to 25 cents lower Monday following overnight losses on continued bearish weather patterns in the U.S. corn belt.


In overnight trading, July corn was down 25 cents to US$6.55 per bushel, September corn was down 24 1/4 cents to US$6.66 3/4 and December corn was down 23 3/4 cents to US$6.85 1/2.


Prospects for this year's crop continue to improve with favorable weather that is neither too hot nor too dry, analysts said.


"For us, weather is the dominant issue. It's non-threatening," said Don Roose, president of U.S. Commodities in Des Moines.


Weather forecasts, which some traders said sparked a modest rally Friday because of the long-range potential for hot, dry weather, turned bearish once again over the weekend, an analyst said.


The potential for a heat wave in the long-range forecast still bears watching, traders said. A long bout of hot, dry weather would be particularly damaging this year because the crop generally has a shallow root system that will be incapable of tapping into subsoil moisture.


The DTN Meteorlogix forecast calls for mostly dry conditions all week in the corn belt, with scattered showers and thunderstorms in western areas on Wednesday and Thursday and eastern areas on Friday.


A trader said the crop has rebounded from a wet spring and June flooding, although it is not as mature as it should be this time of year.


"It's a very lush-looking crop," the trader said. "The problem is it's a foot short."


The corn market faces a "one-two punch," Roose said, as outside markets add to the pressure from weather. Lower crude oil prices and a stronger dollar are bearish for corn, analysts said.


Prices fell in overnight trading below last week's low of US$6.94 3/4 for the December contract. A trader said that after last week's break in prices, downside technical momentum could push December corn toward US$6.50. The contract had closed at US$7.77 on July 3, before the long Fourth of July holiday weekend.


Traders are expecting the percentage of the crop rated good or excellent in Monday's U.S. Department of Agriculture crop progress report to increase 1 to 3 percentage points. The report will be released after Monday's trading close.


For the week ended July 8, Speculative funds cut 29,992 contracts from the CBOT corn long positions and cut 2,701 contracts from their short positions, putting them net long 157,282 contracts, the Commodity Futures Trading Commission reported Friday.


The supplemental commitment of traders report also showed that commercial funds increased their long positions by 26,686 contracts and cut their short positions by 17,821 contracts, putting them now short 462,102 contracts. Index funds cut 4,810 contracts from their long positions and added 538 contracts to their short positions, putting them net long 411,931 contracts, the CFTC said.

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