August 26, 2008

 

CBOT Corn Outlook on Tuesday: Down 10-12 cents on technical weakness, outside markets

 

 

Chicago Board of Trade corn futures are expected to open 10 to 12 cents lower Tuesday on technical weakness and pressure from outside markets, traders said.

 

In overnight trading, September corn was down 12 cents to US$5.68 1/4 per bushel, December corn was down 11 1/4 cents to US$5.88 3/4 and March corn was down 10 1/2 cents to US$6.09.

 

A failed rally Monday likely "aggravated some technical selling," an analyst said, with funds continuing to leave the market.

 

"Yesterday's action was a bit of a vote of no-confidence," said John Kleist, broker/analyst for Allendale in McHenry, Ill.

 

A trader said that coupled with the strength in the dollar, weak demand for corn is weighing on the market.

 

"It's just a really tough environment right now to sustain commodity rallies," he said.

 

Weather is not seen as a significant factor Tuesday, although the trader said the relatively dry forecast is bullish if traded in a vacuum. Many areas of the U.S. corn belt need rainfall to sustain the crop.

 

The DTN Meteorlogix forecast calls for mostly dry conditions Tuesday and Wednesday in the U.S. corn belt Tuesday, except for showers southeast of the Ohio River. Conditions will remain mostly dry through Saturday, except for a few light showers.

 

Monday's U.S. Department of Agriculture Crop Progress report showed declining corn ratings and a crop that remains behind normal.

 

The USDA said 64% of corn was in good-to-excellent condition as of Sunday, down from 67% last week. Traders had expected the rating to stay unchanged or decline as much as three percentage points.

 

Development continues to lag. Sixty-eight percent of the crop was in the dough stage of development, down from 88% last year and the average of 82%, according to the USDA.

 

The crop was 26% dented, down from 58% last year and the average of 47%, according to the USDA. In Iowa, 13% of the crop was dented, down from 53% last year and the average of 40%.

 

The next upside price objective is to push and close December prices above solid technical resistance at Monday's high of US$6.28 3/4, a technical analyst said. The next downside price objective for the bears is to push and close prices below solid technical support at US$5.80.

 

Kleist said there is support for December corn around US$5.85 to US$5.80, and at the 10-day moving average of US$5.79 and 200-day moving average of US$5.74.

 

In international news, The Philippine Department of Agriculture said Tuesday it was seriously considering a demand made by local corn farmers to increase the government intervention price for corn by 30%.