July 24, 2008

 

CBOT Corn Outlook on Thursday: Up 4-7 cents on overnight gains

 

 

Chicago Board of Trade corn futures are expected to open 4 to 7 cents higher following overnight gains as analysts eye a potential rebound on oversold conditions.

 

In overnight trading, September corn was up 7 1/2 cents to US$5.79 per bushel, December corn was up 7 1/2 cents to US$5.98 and March corn was up 7 1/4 cents to US$6.17.

 

After breaking more than US$2 in less than a month, some analysts say the market is oversold, and that Wednesday's rally from intraday lows and overnight gains show the market is finding some support.

 

"You're seeing a situation where the buyers are saying there's not much downside risk, and the sellers are saying 'God, I don't want to be short at this level,'" said Shawn McCambridge, senior grains analyst with Prudential-Bache. "So that combination should provide some decent support for a while."

 

He said the market has been a little "premature" in removing all of the weather premium out of the market because there is still a lot of growing season left.

 

End-users have provided support at current price levels, analysts said, and there are signs of increased demand. A trader noted that the Japan's purchase of 244,696 metric tonnes of corn from the U.S., announced Wednesday, was a sign of increased demand from commercial buyers.

 

But a lack of bullish weather news should limit any rebound, traders and analysts said.

 

"I'm struggling to find an input that will sustain a significant recovery here," a trader said.

 

Prices have fallen throughout the month on favorable crop weather, and the slide has continued as funds liquidate out of commodities in general. McCambridge said a lot of the slump has not been related to fundamentals. Analysts note that the crop is still a long way from being "in the bin."

 

"As we normally do when we start to see non-fundamental moves in the market, I think we've exaggerated the downside potential in relation to the time of the year right now," he said.

 

Some analysts say the market could continue to fall over the next few weeks, especially if U.S. corn belt weather remains favorable.

 

The DTN Meteorlogix forecast calls for scattered showers and thunderstorms totaling between 0.25 and 1.0 inches in the western corn belt Thursday. The forecast calls for scattered showers and thunderstorms across the corn belt Friday and Saturday, followed by mostly dry weather Sunday and Monday.

 

On Thursday, the U.S. Department of Agricultures announced net export sales of 823,100 metric tonnes for the 2007-08 and 2008-08 marketing years, down slightly from 830,000 metric tonnes the previous week. Analysts' estimates ranged from 500,000 to 950,000 metric tonnes.

 

The next upside price objective is to push and close December prices above solid technical resistance at US$6.00, a technical analyst said. The next downside price objective for the bears is to push and close prices below solid technical support at today's low of US$5.62 3/4.

 

Resistance for December corn is seen at US$6.00, the analyst said. First support is seen at US$5.80 and then at US$5.75.