August 14, 2008

 

CBOT Corn Outlook on Thursday: 5-7 cents higher on technical momentum

 

 

Chicago Board of Trade corn futures are expected to open 5 to 7 cents higher Thursday on overnight grains and renewed technical strength, traders said.

 

In overnight trading, September corn was up 7 cents to US$5.46 per bushel, December corn was up 7 cents to US$5.65 1/2 and March corn was up 6 cents to US$5.83 3/4.

 

Corn has climbed more than 40 cents the past two days after falling for weeks. Corn's fundamentals haven't changed, but the market made a technical reversal following Tuesday's release of the government's crop production report, which traders said was bearish.

 

"I think as much as anything else we did the technical work a couple days ago," a trader said.

 

After closing up 30 cents, the daily trading limit, on Wednesday, Thursday's trading limit will be an expanded 45 cents.

 

The market was also boosted by outside markets Wednesday, particularly stronger crude oil, but a trader questioned crude's strength, and said outside markets may not provide continued support.

 

Analysts also say it remains to be seen whether this week's rally will lure funds back into the market. Fund liquidation helped drive corn almost US$3 lower between late June and this week.

 

A trader said a drop in open interest Wednesday indicated corn's gains were largely the result of a short-covering rally. "It didn't look like a new entry into corn," he said.

 

But with the U.S. Department of Agriculture's crop production and supply and demand reports out of the way, analysts say the trade is looking ahead to the threat of an early frost on the crop. An early frost, or potentially even a typical first frost, could cause more yield damage this year because the crop was planted early, analysts said.

 

The DTN Meteorlogix forecast calls for mostly dry conditions in the eastern U.S. corn belt through Monday, with periodic rainfall in central and western areas. Temperatures will be near to below normal.

 

Total net export sales were reported at 1.335 million metric tonnes for the week ended Aug. 7, up from 1.056 million last week and above analysts' expectations of between 700,000 and 1.1 million metric tonnes. The most recent report includes 385,900 metric tonnes for old crop and 949,000 metric tonnes for new crop.

 

Analysts say the market's gains this week indicate a short-term low may be in place.

 

The next upside price objective is to push and close December prices above solid technical resistance at US$5.80, the technical analysts said. The next downside price objective is to push and close prices below solid technical support at today's low of US$5.28 3/4.

 

First resistance for December corn is seen at the July low of US$5.62 3/4 and then at US$5.75. First support is seen at US$5.50 and then at US$5.45.

 

In international news, the European Union's 2008-09 grain crop forecast has been revised up to 299.7 million metric tonnes, from the July estimate of 295.7 million tonnes, said Strategie Grains latest analytical report published Thursday.

 

Corn production was revised to 59.7 million tonnes, up 1.1 million tonnes from last month's forecast, but yields remain subject to weather conditions in the coming month, said the report.

 

Also, Kenya has approved the importation of 150,000 tonnes of corn from South Africa and the U.S. to meet a domestic shortfall, an official said Thursday.