August 27, 2008

 

CBOT Corn Outlook on Wednesday: 5-7 cents higher on outside markets, dryness

 

 

Chicago Board of Trade corn futures are expected to open higher Wednesday as the market continues to follow outside influences such as crude oil and the dollar, traders said.

 

Corn is called 5 to 7 cents higher. In overnight trading, September corn was up 5 3/4 cents to US$5.81 per bushel, December corn was up 5 1/4 cents to US$5.99 1/4 and March corn was up 6 1/2 cents to US$6.20.

 

Higher crude oil, which is climbing on hurricane fears, and relatively dry weather in the U.S. corn belt are expected to support the market, traders said.

 

"I think it's a function of crude and the same weather pattern," a trader said of the overnight strength.

 

Although it is still several days from a potential U.S. landfall, Tropical Storm Gustav is a factor in the markets, traders said. The storm could potentially hit the U.S. gulf coast Sunday, according to forecasts, and traders are worried that the storm could damage the region's oil-producing infrastructure.

 

"Everyone knows if there is a direct hit, relief at the pump and with energy prices could quickly disappear," the trader said.

 

Traders say that although the storm could eventually provide some needed rain in the corn belt, it is not expected to weigh on corn prices because of its bullish effect on crude. The storm could also cause damage to crops along the gulf coast, analysts said.

 

Corn has little of its own news, traders said. The dollar has been a key factor in the market lately, and a lower dollar would support the market, as it makes U.S. exports more attractive.

 

The crop remains behind schedule and is vulnerable to an early frost, analysts said. Many areas of the corn belt are also dry, and a continued lack of rain could damage yields, they said.

 

The DTN Meteorlogix forecast calls for mostly dry conditions through Sunday. The forecast calls for a few light showers in the northwest U.S. corn belt Wednesday, and scattered showers and thunderstorms in western areas Wednesday night into Thursday.

 

The next upside price objective is to push and close December prices above solid technical resistance at this week's high of US$6.28 3/4 per bushel. The next downside price objective is to push and close prices below solid technical support at US$5.80.

 

First resistance for December corn is seen at US$6.00 and then at Tuesday's high of US$6.03. First support is seen at Tuesday's low of US$5.88 and then at US$5.80.