July 18, 2008

 

CBOT Corn Outlook on Friday: Lower on weather, technical momentum

 

 

Chicago Board of Trade corn futures are expected to open 2 to 4 cents lower Friday, as the market continues to feel pressure from favorable crop weather and downside technical momentum.

 

In overnight trading, September corn ended down 3 1/4 cents to US$6.28 per bushel, December corn ended down 4 cents to US$6.46, and March corn was down 4 1/4 cents to US$6.64 1/2.

 

After weeks of favorable crop weather, prices are back where they were before historic flooding across the U.S. Midwest in June. The market is now trending lower, even as funds continue to maintain significant long positions, said Brian Hoops, President of Midwest Market Solutions.

 

"This week they have not liquidated a tremendous amount," Hoops said. "The market is falling rather easily without huge fund selling, and there may be additional fund selling if the charts continue to look poor."

 

Outside markets have been bearish, with corn and other agricultural commodities pressured this week by plunging crude oil prices. Further plunges could prompt more liquidation in corn, analysts said.

 

Traders continue to eye the weather, which they said remains bearish. Concerns about the possibility of hot, dry weather have provided some support to prices this week, but in the near-term the crop continues to enjoy periodic rainfall and a lack of excessive heat.

 

If excessive heat does not emerge in the forecast during the next couple of days, the trade will begin to assume healthy yields out of this year's crop, a trader said. He said traders could be cautious ahead of the weekend, to protect against possible weather changes.

 

DTN Meteorlogix said in its forecast that the weather will remain generally favorable for the crop, although wet weather in the western U.S. corn belt needs to be monitored. The forecast calls for showers and thunderstorms in the northern corn belt Friday, and in northern and western areas Saturday. Showers and thunderstorms will develop throughout the corn belt Sunday and Monday, and will linger in the east on Tuesday.

 

The next upside price objective is to push and close prices above psychological resistance at US$7.00, a technical analyst said. The next downside price objective is to push and close prices below solid technical support at US$6.30.

 

A couple analysts have said that if corn closes below a May high of US$6.55, the next support level would be around US$6.21 and then US$6.00. Other analysts say they are watching a gap down to US$6.43 1/4.