July 30, 2008


CBOT Corn Outlook on Wednesday: Up slightly on USDA decision



Chicago Board of Trade corn futures are expected to open slightly higher or remain unchanged Wednesday as the market balances a U.S. government decision not to release protected lands to farmers with a more benign weather outlook, traders and analysts said.


Corn is called steady to 2 cents higher. In overnight trading, September corn was up 3/4 cent to US$5.94 3/4 per bushel and December corn was up 1/2 cent to US$6.14.


A U.S. Department of Agriculture decision Tuesday afternoon to deny farmers early release from Conservation Reserve Program contracts is bullish, a trader said.


The CRP encourages farmers to convert highly erodible cropland or other environmentally sensitive acreage to vegetative cover, according to the USDA. Farmers receive an annual rental payment for the term of a multi-year contract.


The decision means there will be "finite acreage" available for corn production in the near future, the trader said.


The government was considering releasing the land due to concerns over rising food costs.


The potential for a sustained rally, however, is being tempered by a weather outlook forecasting favorable crop-growing conditions, traders and analysts said.


The reaction to the USDA decision could be stunted because "weather looks less threatening than it did yesterday," said Don Roose, president of U.S. Commodities in Des Moines.


The DTN Meteorlogix forecast calls for mostly dry conditions in the northwest corn belt with scattered showers and thunderstorms hitting the central and southern portions of the region in the next two days.


The forecast says conditions are favorable for the developing corn crop, although the extended outlook predicts above-normal temperatures.


Outside markets will have little to any affect on corn prices in early trading, traders and analysts said.


"The outside markets this morning are flat to lower," said Roose.


The next upside price objective is to push and close December prices above solid technical resistance at US$6.20, a technical analyst said. The next downside price objective is to push and close December prices below solid technical support at US$5.80.


First resistance for December corn is seen at Tuesday's high of US$6.16 1/4 and then at US$6.20. First support is seen at US$6.10 and then at US$6.05.

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