August 5, 2008

 

CBOT Corn Outlook on Tuesday: Down 12-16 cents in continued liquidation

 

 

Chicago Board of Trade corn futures are expected to open sharply lower Tuesday, as the market feels continued pressure from broad-based commodity liquidation and ideal crop weather.

 

Corn is called 12 to 16 cents lower. In overnight trading, September corn was down 16 1/4 cents to US$5.19 1/4 per bushel, December corn was down 16 1/4 cents to US$5.39 1/4 and March corn was down 15 3/4 cents to US$5.60.

 

The December contract broke below its 200-day moving average Monday and is at its lowest price since March. Corn was just one of many commodities that plummeted Monday, amid widespread fund liquidation.

 

"We are certain that there have been worse days for the collective commodity markets, but we cannot, in our lifetime, remember them...nor do we want to," Dennis Gartman wrote Tuesday in his daily newsletter, The Gartman Letter.

 

A stronger dollar and weaker crude oil are seen pressuring corn. Traders added that weaker demand in China, which has curtailed its manufacturing to accommodate the Olympics, is a bearish influence.

 

"I don't even know why it warrants talking (corn) fundamentals," a trader said. "This is much more big-picture."

 

Traders and analysts are turning their attention to the U.S. Department of Agriculture's Aug. 12 supply and demand report, which they said will include a fuller picture of the effects of flooding in the Midwest in June. After dire projections following the floods, yield projections have climbed because of weeks of favorable weather.

 

Commodity risk management firm FC Stone on Monday estimated the 2008-09 U.S. corn crop at 12.197 billion bushels, with a yield of 154.5 bushels per acre.

 

The estimates are up from the the U.S. Department of Agriculture's July projections. The USDA estimated 2008 corn production at 11.715 billion bushels, with a yield of 148.4 bushels per acre.

 

In 2007, U.S. corn production was 13.074 billion bushels, with a yield of 151.1 bushels per acre.

 

Weather remains ideal for the crop, traders said, with DTN Meteorlogix forecasting periodic showers and thunderstorms along with moderate temperatures through Saturday.

 

Traders said the market would get little support from Monday's weekly crop progress report from the USDA, even though silking remains behind the average pace.

 

The USDA said the good-to-excellent condition rating for the U.S. corn crop was 66%, unchanged from the preceding week and in line with traders' estimates. The steady rating is a good sign for the crop, traders said, since corn conditions usually deteriorate this time of year.

 

The USDA said silking of the U.S corn crop stood at 83%, up from 59% last week but below the five-year average of 91%.

 

Serious chart damage occurred Monday to suggest a major market top is in place and that the path of least resistance in corn will remain sideways to lower for at least the near term, a technical analyst said.

 

The next upside price objective is to push and close December prices above solid technical resistance at Monday's high of US$5.84 1/2, the technical analyst said. The next downside price objective is to push and close prices below solid technical support at the March low of US$5.13 1/4.

 

Tuesday's daily trading limit will remain 30 cents, according to the CME Group Web site.