July 23, 2008

 

CBOT Corn Outlook on Wednesday: Sharply lower as liquidation continues

 

 

Chicago Board of Trade corn futures are expected to open sharply lower Wednesday following overnight losses, as corn continues to plummet amid ideal crop-growing conditions and widespread commodity liquidation.

 

Corn is called 18 to 20 cents lower. In overnight trading, September corn was down 21 1/2 cents to US$5.52 per bushel, December corn was down 21 1/4 cents to US$5.71 and March corn was down 21 1/4 cents to US$5.90.

 

Traders and analysts said corn has tumbled as funds move money out of commodities.

 

"We had a love affair with commodities, I would say the biggest bull market in history. We had the public and the funds heavily in the market," said Don Roose, president of U.S. Commodities in West Des Moines, Iowa. "Now what this market is about is liquidation. People want out, not in."

 

Weather remains bearish, and appears to be perfect during pollination, which is the most important period of the season. A trader said added that there are "no demand inputs to hang your hat on" that could spark a rally.

 

The trader said corn has likely seen its largest decline in such a short period in its history. Since closing at US$7.80 1/2 on July 2, December corn has dropped more than US$2.

 

More chart damage was inflicted Tuesday and prices are in a steep four-week-old downtrend on the daily bar chart, a technical analyst said. Short-term, the market is way oversold, technically, and is due for at least a corrective upside bounce very soon, he said.

 

Traders and analysts said the market could continue to fall, however, especially if weather remains bearish. Moderate temperatures and periodic rain are good for the crop, analysts said.

 

The DTN Meteorlogix forecast calls for dry conditions Wednesday and Thursday in the eastern corn belt. The western corn belt will see a few showers Wednesday, followed by scattered showers and thunderstorms totaling between 0.25 and 1.00 inches Thursday. Episodes of scattered or widely scattered showers will continue Friday and Saturday.

 

Roose said corn's drop has put on the backburner efforts to open up federal Conservation Reserve Program lands to farmers and ease the federal ethanol mandate. Both moves have been promoted as a way to stem rising food prices.

 

The market could face continued pressure from lower crude oil prices, traders and analysts said. Some expected corn to rebound Tuesday, but those expectations were thwarted thanks to a break in crude.

 

The next upside price objective is to push and close December prices above solid technical resistance at this week's high of US$6.29, the technical analyst said. The next downside price objective is to push and close prices below solid technical support at US$5.78.