July 21, 2008

 

CBOT Corn Outlook on Monday: Lower on weather, technical weakness

 

 

Chicago Board of Trade corn futures are expected to open 3 to 5 cents lower Monday as bearish weather and downside technical momentum continue to pressure the market.

 

In overnight trading, September corn was down 3 1/2 cents to US$6.06 per bushel, December corn was down 3 1/2 cents to US$6.25 and March corn was down 4 cents to US$6.43 3/4.

 

An analyst said troubled financial markets, and the prospect of continued fund liquidation, hangs over corn.

 

"If index funds stop liquidating and crude oil has some bottoming price action to it, we should be able to see some two-sided trade today," said Mike Zuzolo, senior analyst for Risk Management Commodities.

 

Traders said the market may be oversold after dropping steeply this month, especially last week.

 

"Maybe our saving grace is corn had its largest one-week drop in 12 years last week," a trader said. The trader said prices are nearing strong support levels around US$6 for nearby September corn.

 

Ideal crop-growing weather, which has pressured corn in recent weeks, remains a bearish influence, traders said. The U.S. corn belt has so far avoided the extreme hot, dry weather that could have caused significant damage to the crop this year, analysts said.

 

DTN Meteorlogix calls for scattered showers and thunderstorms Monday and Tuesday in the eastern corn belt, and scattered showers and thunderstorms developing in the west Wednesday, ending Thursday. Temperatures will be near to below normal, according to the forecast.

 

The latest commitment of traders report demonstrates the fund liquidation that has helped drive down prices, analysts said.

 

Speculative funds cut 19,294 contracts from their CBOT corn long positions and added 22,234 contracts to their short positions, putting them net long 115,754 contracts, the Commodity Futures Trading Commission reported Friday.

 

The supplemental commitments of traders report showed commercial funds added 30,851 to their long positions and cut 29,191 from their short positions, putting them net short 402,062 contracts. Index funds cut 9,618 contracts from their long positions and added 22 contracts to their short positions, putting them net long 402,291 contracts, the CFTC said.

 

Farm Futures said in its morning commentary that the report showed "big speculators (are) now holding less than half the bullish bet they did early in the season."

 

The next upside price objective is to push and close prices above solid technical resistance at US$6.50, a technical analyst said. The next downside price objective for the bears is to push and close prices below major psychological support at US$6.

 

First resistance for December corn is seen at US$6.30 and then at US$6.35, the analyst said. First support is seen at US$6.20 and then at US$6.15.