August 6, 2008

 

CBOT Corn Outlook on Wednesday: Down slightly on overnight, lack of news

 

 

Chicago Board of Trade corn futures are expected to open slightly lower Wednesday on overnight losses and a lack of significant news, as the market awaits an upcoming government report.

 

Corn is called 1 to 3 cents lower. In overnight trading, September corn was down 1 1/4 cents to US$5.24 per bushel, December corn was down 1/2 cent to US$5.44 1/2 and March corn was down 3 1/2 cents to US$5.61 1/4.

 

The market has little fundamental news to digest at the moment, and traders said trading should be slow Wednesday unless action from outside markets weighs on corn.

 

"I think we'll probably have two-sided trade with a lower close," said Terry Reilly, an analyst with Citigroup.

 

The market could find support from end-users if prices continue to drop, Reilly said. Corn's direction will depend in part on whether liquidation by index funds, which has sent the market lower, has run its course, analysts said. The market had appeared to rebound Tuesday before retreating and closing about 10 cents lower.

 

Traders are looking ahead to the U.S. Department of Agriculture's Aug. 12 crop production report, which analysts say should provide a clearer picture of the impact of June's flooding on the corn crop.

 

The USDA estimated yields of 148.4 bushels per acre in July, and the trade is expecting that number to increase following weeks of ideal crop-growing weather. Some private estimates released this week put the yield around 154 to 155 bushels per acre, although others say the yield will be closer to 150.

 

Despite the recent good weather, analysts warn that because the crop was planted late and remains behind schedule, an early frost could have a significant effect on production this year.

 

The December contract has dropped more than US$2.50 since late June, and is trading at its lowest price since March. December is almost 80 cents lower than its intraday high on July 31, and some analysts say the market may be oversold and due for a bounce.

 

The next upside price objective is to push and close December prices above solid technical resistance at this week's high of US$5.84 1/2, a 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.

 

First resistance for December corn is seen at US$5.50 and then at US$5.62 3/4, the technical analyst said. First support is seen at Tuesday's low of US$5.36 1/4 and then at US$5.25.

 

In international news, corn prices in China's major producing areas were lower in the week to Wednesday on low demand and continued state sales. The recent tumble in corn futures prices at Dalian Commodity Exchange also helped to pressure the cash prices.

 

China National Grain and Oils Information Center, a government think-tank, on Wednesday hiked its 2008 corn output estimate by 2 million tonnes to 156 million tonnes. Reilly said that could weigh on the market Wednesday.