July 16, 2008

 

CBOT Corn Outlook on Wednesday: Down slightly on weather, lack of news

 

 

Chicago Board of Trade corn futures are expected to open 2 to 3 cents lower Wednesday on favorable crop weather, outside markets and a lack of bullish news, analysts said.

 

In overnight trading, September corn was down 3 1/2 cents to US$6.44 3/4 per bushel, December corn was down 3 cents to US$6.63 3/4 and March 2009 corn was down 3 1/4 cents to US$6.82.

 

"There's really a lack of fresh news out there," said Terry Reilly, analyst for Citigroup. "It appears like the market continues to trade on outside markets, in particular crude oil."

 

Weather forecasts continue to be seen as bearish. The DTN Meteorlogix forecast calls for mostly dry conditions across the central and southern U.S. corn belt through Sunday, with some showers and thunderstorms across northern areas during that period.

 

The crop should continue to enjoy solid development as long as the corn belt avoids excessive heat or dryness. However, analysts say increasing dryness in the far western corn belt and the potential for crop stress in the forecast bears watching.

 

"It's enough of a carrot out there that it might provide a little more stability to the market," a trader said.

 

Analysts said two-side trade is possible, especially if crude oil gains. Some believe the market is oversold.

 

Prices have fallen sharply throughout July as the market has extracted a weather premium. On Tuesday, prices fell after crude oil prices plunged.

 

Crude oil traders are awaiting a government report on inventory data, which is expected to be released at 10:35 EDT, shortly after CBOT grains trading opens.

 

December corn has closed below the 50-day moving average two days in a row, and downside technical momentum could continue pressure the market, traders said.

 

Bears have near-term technical momentum amid ideas that a major market top is now in place for corn, a technical analyst said. The next upside price objective is to push and close December prices above psychological resistance at US$7.00. The next downside price objective is to push and close prices below solid technical support at the May high of US$6.55 1/2.

 

First resistance for December corn is seen at US$6.75 and then at US$6.80, the technical analyst said. First support is seen at Tuesday's low of US$6.61 1/2 and then at US$6.55 1/2.

 

Reilly said if December breaks through support around US$6.56, the next support level is around US$6.21.
   

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