July 29, 2008

 

CBOT Corn Outlook on Tuesday: Down on overnight losses, crop progress

 

 

Chicago Board of Trade corn futures are expected to open slightly lower Tuesday on overnight losses, pressure from outside markets and improving crop conditions, analysts said.

 

Corn is called 2 to 4 cents lower. In overnight trading, September corn was down 4 1/2 cents to US$5.77 1/2, December corn was down 3 3/4 cents to US$5.97 1/2 and March corn was down 3 1/2 cents to US$6.17 1/4.

 

The overnight losses came after corn rose for three consecutive trading days. An analyst said corn may take its cue from other markets early Tuesday, particularly soybeans, which were down sharply overnight.

 

"They're going to play a sympathetic role off of beans, because beans were the ones that got pummeled here last night the most," said Mike Zuzolo, senior market analyst with Risk Management Commodities.

 

Analysts have mixed views of weather forecasts. Prices climbed Monday in part on some forecasts calling for excessive heat in the U.S. corn belt, but traders and analysts warn that previous predictions this summer of potentially damaging heat have failed to materialize.

 

DTN Meteorlogix calls for "generally favorable weather for pollinating corn and flowering soybeans with no persistent hot or dry weather indicated." The weather service says a brief period of temperatures reaching the middle 90s Fahrenheit is possible later this week, followed by the return of scattered showers and thunderstorms return during the early to middle part of next week.

 

Analysts said corn may also be pressured by broader economic concerns, which could dampen demand for corn and other commodities.

 

Monday's crop progress report from the U.S. Department of Agriculture showed the crop is continuing to improve, but still lags behind normal progress.

 

The USDA said silking of the U.S. corn crop stood at 59% in the week ended July 27. Silking is up from 34% the previous week, but is well behind the 81% five-year average.

 

Top corn producer Iowa made significant gains in its silking, which jumped to 45% from 14%. But that's still 36 percentage points behind its five-year average.

 

The good-to-excellent rating on the crop increased by one percentage point to 66%.

 

Analysts said it is highly unusual for the crop to continue to improve in the middle of the summer. The improvement "suggests yields that could be quite good," Joel Karlin, analyst for Western Milling, wrote in a newsletter. But the below-average silking could pose problems later in the season, he said.

 

"Perhaps a bigger question is whether the crops will be fully mature prior to the onset of freezing temperatures in the Midwest," Karlin said.

 

Despite recent gains, prices are still in a steep four-week-old downtrend on the daily bar chart, a technical analyst said, and a bearish pennant pattern has formed on the daily bar chart recently.

 

The next upside price objective is to push and close December prices above solid technical resistance at US$6.20, the technical analyst said. The next downside price objective for the bears is to push and close prices below solid technical support at US$5.80. First resistance for December corn is seen at Monday's high of US$6.10 and then at US$6.15. First support is seen at Monday's low of US$5.94 and then at US$5.90.

 

In international news, Philippine corn output in 2008 may be lower than expected, as surging fertilizer costs could deter farmers from planting the crop in the second half of the year, a senior official of the Department of Agriculture said Tuesday.