August 1, 2008

 

CBOT Corn Outlook on Friday: Slightly lower on benign weather

 

 

Chicago Board of Trade corn futures are expected to open slightly lower on a "non-threatening" weather forecast, fund liquidation and speculation about the possible waiving of a Texas ethanol mandate, traders said.

 

Corn is called 1 to 3 cents lower. In overnight trading, September corn was down 1 1/4 cents to US$5.86 1/4 per bushel, December corn was down 1 1/4 cents to US$6.06 1/4 and March corn was down 2 1/2 cents to US$6.25.

 

Rumors have abounded about the Environmental Protection Agency waiving the ethanol mandate for Texas, which analysts said could pressure the market.

 

"Anytime they talk about ethanol, you have to talk about the corn," a trader said. "It's going to keep a lid on corn along with the weather."

 

One trader said the rumor will likely fail to pan out. Nevertheless, prices will be pressured due to speculation alone, he said.

 

There is also "big-time" fund liquidation, a trader said. Month-end liquidation caused a last-minute decline in corn prices Thursday, further inflating the day's losses.

 

An increasingly "non-threatening" weather forecast across the U.S. corn belt will also drive prices lower, traders and analysts said. The weekend is expected to bring above-average temperatures throughout the region, with rain accompanying heat in the east.

 

The DTN Meteorlogix forecast calls for mostly dry conditions in the western portion of the corn belt with scattered showers and thunderstorms developing in the eastern portion of the region Friday. Mostly dry conditions will prevail Saturday, although scattered showers and thunderstorms will once again develop in the east.

 

Mostly dry conditions will prevail throughout the corn belt Sunday through Tuesday, excepting the eastern portion of the region, with above average temperatures persisting throughout this period.

 

Longer-term forecasts have most heat retreating by Tuesday and Wednesday, which could further pressure corn, traders and analysts said.

 

Outside markets could also weigh on the price of corn, particularly a slight slip in crude-oil prices and a higher dollar, a trader said.

 

The next upside price objective is to push and close December prices above solid technical resistance at this week's high of US$6.24 3/4, a technical analyst said. The next downside price objective is to push and close December prices below solid technical support at US$6.00.

 

First resistance for December corn is seen at US$6.10 and then at US$6.15. First support is seen at Thursday's low of US$6.05 and then at US$6.00.