September 2, 2008

 

CBOT Corn Outlook on Tuesday: Down sharply on crude, weather

 

 

Chicago Board of Trade corn futures are expected to open sharply lower Tuesday following overnight losses on weak crude oil and prospects for wet U.S. corn belt weather.

 

Corn is called 25 to 30 cents lower. In overnight trading, September corn, which is trading without limits because it is in delivery, was down 26 1/4 cents to US$5.42 per bushel. December corn was down 27 3/4 cents to US$5.57 and March corn was down 30 cents, the daily trading limit, to US$5.74.

 

Traders said the market will follow crude oil, which after climbing on fears of Hurricane Gustav last week is now plunging because of less-than-expected damage. The fall pushed corn and other crops lower.

 

"The weakness that we had overnight, it wouldn't be surprising to see us try and press limit lower on corn and beans right on the open here," said Don Roose, president of U.S. Commodities in West Des Moines, Iowa.

 

The storm could now end up being bearish for the market, analysts say, depending on where the remnants end up.

 

DTN Meteorlogix said rains associated Gustav moving northward later this week could help the Illinois crop. It is uncertain whether Indiana and Ohio would also see rain. The crop needs moisture in many places after a dry August, traders said. The corn belt was dry throughout the Labor Day weekend, according to DTN Meteorlogix, which calls for showers in the western corn belt Tuesday and Wednesday.

 

In addition to the beneficial rain in the forecast, traders and analysts said the lack of a freeze is also good for the crop, which is behind schedule this year and more succeptible to frost damage.

 

"We've got a crop that's immature, and no sign of frost through the middle of September yet," Roose said. "Though that could change."

 

A technical analyst said corn bulls are fading and the bears have some downside technical momentum.

 

The next upside price objective is to push and close December prices above solid technical resistance at US$6.00, the technical analyst said. The next downside price objective for the bears is to push and close prices below solid technical support at the July low of US$5.62 3/4.

 

Speculative funds cut their CBOT corn long positions by 13,339 contracts and their short positions by 8,295 contracts, putting them net long 62,331 contracts, the Commodity Futures Trading Commission reported Friday.

 

The supplemental commitment of traders report also showed commercial funds cut their long positions by 45,082 contracts and their short positions by 44,597 contracts, putting them net short 320,742 contracts. Index funds cut their long positions by 2,237 contracts and their short positions by 3,008 contracts, putting them net long 351,145 contracts, the CFTC said.

 

Deliveries against the September contract were reported at 202 lots Tuesday morning.