August 28, 2008

 

CBOT Corn Outlook on Thursday: Down 7-9 cents as rainfall pressures

 

 

Chicago Board of Trade corn futures are expected to open lower Thursday on U.S. corn belt rainfall, amid cautious trading and a lack of news.

 

Corn is called 7 to 9 cents lower. In overnight trading, September corn was down 7 1/2 cents to US$5.70 per bushel, December corn was down 7 1/2 cents to US$5.88 1/2 and March corn was down 10 cents to US$6.05.

 

Traders said rainfall overnight was a bearish influence, as parts of Minnesota, Iowa and Wisconsin saw more rain than some had expected. The crop in many areas is in need of rainfall after a dry August. The rain was moving through Iowa into Illinois Thursday morning.

 

"The bottom line is there is some relief and shrinkage of currently dry areas," a trader said.

 

The trade is eyeing a weather situation that is uncertain, largely due to Tropical Storm Gustav, which could hit the U.S. Gulf coast early next week. Short-term, the storm is bullish for corn because it is causing concern about damage to oil infrastructure, a floor analyst said. But long-term, the storm could be a bearish influence if it dumps rain on the Midwest, he said.

 

The uncertainty about the storm leading into a long Labor Day weekend is prompting cautious trading, analysts said.

 

"It's dangerous to take a big position home, because who knows what's going to happen by Tuesday," the floor analyst said.

 

The DTN Meteorlogix forecast calls for scattered showers and thunderstorms in the western U.S. corn belt Thursday, with scattered to widely scattered rainfall in west and central areas Thursday night. The eastern U.S. corn belt will see scattered showers and thunderstorms Friday, and the corn belt will be mostly dry Saturday through Monday.

 

Long-range forecasts are "highly uncertain," DTN Meteorlogix said.

 

The trade is also eyeing any potential for an early frost, although there is not one currently in the forecast.

 

Analysts said most of the volume overnight was in spread trading ahead of first notice day, which is Friday.

 

Export sales were reported Thursday at 846,800 metric tonnes for the week ended Aug. 21, including 303,000 metric tonnes for the 2007-08 marketing year and 543,800 for 2008-09. The sales exceeded analysts estimates of between 400,000 and 800,000 for both old and new crop.

 

The floor analyst said the export sales were supportive, but a trader said demand remains light and that the numbers were neutral or slightly negative for the market.

 

A technical analyst said his "bias is that the corn market will chop in a more sideways fashion and possibly with a slight downside slant in the coming days and weeks."

 

The next upside price objective is to push and close prices above solid technical resistance at this week's high of US$6.28 3/4, the 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.

 

First resistance for December corn is seen at US$6.00 and then at Wednesday's high of US$6.04 1/2. First support is seen at Wednesday's low of US$5.85 3/4 and then at US$5.80.