August 13, 2008


CBOT Corn Outlook on Wednesday: 1-2 cents higher on follow-through support



Chicago Board of Trade corn futures are expected to open slightly higher Wednesday on light follow-through buying after Tuesday's rally.


Corn is called 1 to 2 cents higher. In overnight trading, September corn climbed 2 1/4 cents to US$5.11 1/4 per bushel, December corn climbed 2 3/4 cents to US$5.31 1/4 and March corn climbed 2 cents to US$5.49 3/4.


A trader said he expects a "quiet bounce after yesterday's technical recovery." The market rallied Tuesday despite bearish U.S. Department of Agriculture projections for corn yield, total production and ending stocks.


"Seeing that we had a nice mini-reversal on the charts yesterday, and seeing that we had big volume yesterday, and seeing that we had a jump in open interest I would say that the outlook is favorable for corn for the upside," said John Kleist, broker/analyst for Allendale in McHenry, Ill.


Tuesday's gains represented more than just a technical bounce, Kleist said. Prices that fell almost US$3 in less than two months have prompted increased corn demand for livestock, ethanol and exports, he said.


"The fact of the matter is we started building demand back into the market," Kleist said.


Tuesday's bounce prompted speculation over whether corn has made a near-term bottom. A trader said that although the market has "gotten the bearish news out of the way" now that the USDA's August production report has been released, there is still a lack of bullish news that would spark a significant rally. He added that crude oil prices, which have fallen along with other commodities in recent weeks, will play a role in corn's direction.


"If crude can't post a bottom, I can't see anything in commodities doing so," a trader said.


The crop continues to enjoy favorable weather, analysts said, with periodic rainfall and moderate temperatures in the DTN Meteorlogix forecast through Sunday.


In export news, South Korea has issued two separate tenders for a total of 90,000 metric tonnes of U.S. corn, Midwest Market Solutions said in a morning newsletter.


Solid follow-through buying on Wednesday would be a solid technical clue that the corn market has put in a near-term low, but right now the bears still have the near-term technical advantage, a technical analyst said.


The bulls' next upside price objective is to push and close December prices above solid technical resistance at US$5.50. The next downside price objective for the bears is to push and close prices below major psychological support at US$5.00.


First resistance for December corn is seen at Tuesday's high of US$5.35 1/4 and then at US$5.44. First support is seen at Tuesday's low of US$5.25 and then at US$5.18.

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