September 3, 2008

 

CBOT Corn Outlook on Wednesday: 6-8 cents lower on outside pressure, weather

 

 

Chicago Board of Trade corn futures are expected to open lower Wednesday as the market continues to feel pressure amid broad-based commodity liquidation, analysts said.

 

Corn is called 6 to 8 cents lower. In overnight trading, September corn was down 8 cents to US$5.45 per bushel, December corn was down 8 1/4 cents to US$5.61 and March corn was down 8 cents to US$5.80.

 

A break in crude oil below US$110, prompted by less-than-expected damage to the U.S. Gulf coast from Hurricane Gustav, is weighing on corn and other grains markets, analysts said.

 

"This comes at a time when the U.S. dollar has moved to its highest levels in close to eleven months, adding even more pressure to a suddenly vulnerable commodities sector which has been the darling of the investment community for the past three years," Western Milling analyst Joel Karlin said in a weekly newsletter.

 

Some traders say weather is also a bearish factor in the market, with the remnants of Gustav providing beneficial rain to parts of the U.S. corn belt. But others say Gustav's impact will be minimal at this stage of the growing season, also pointing out that some of the driest areas in the eastern corn belt may not see significant rain.

 

DTN Meteorlogix said that heavy to torrential rains associated with Gustav are expected to move through the central Midwest region during the next 48 hours. "Filling crops may still benefit from rain, but this benefit is less as time goes by," DTN Meteorlogix said.

 

Although the forecast says cooler weather will slow the maturation process in western areas during the next few days or more, traders also note that the first frost of the season has yet to appear in the long-range forecast, which is good news for a crop that has had a late growing season.

 

August was dry throughout the corn belt, and figures released Tuesday afternoon show the effects of that weather on the crop, analysts said.

 

Commodity risk management firm FC Stone on Tuesday estimated the 2008-09 U.S. corn crop at 12.159 billion bushels, with a yield of 153.4 bushels per acre.

 

The firm's latest corn estimates represent a decrease from its estimates last month. FC Stone in August estimated the corn crop at 12.197 billion bushels, with a yield of 154.5 bushels per acre. The U.S. Department of Agriculture latest yield projection was 155 bushels per acre with total production of 12.288 billion bushels.

 

The USDA said 61% of the corn crop was in good-to-excellent condition as of Sunday, down from 64% last week. Traders had expected the rating to drop 1-to-3 percentage points.

 

Development continues to lag behind normal. Eighty-three percent of the crop was in the dough stage of development, up from 68% last week but below the five-year average of 91%.

 

The crop was 45% dented, up from 26% last week, but below the average of 65%.

 

A trader said the corn market is technically weak. The December contract gapped lower on the open Tuesday and closed below its 200-day moving average for the first time since Aug. 15.

 

The next upside price objective is to push and close December prices above solid technical resistance at US$5.80 3/4, which would fill on the upside Tuesday's downside price gap, a technical analyst said. The next downside price objective for the bears is to push and close prices below solid technical support at Tuesday's low of US$5.55.

 

First resistance for December corn is seen at Tuesday's high of US$5.77 1/4 and then at US$5.80 3/4, the technical analyst said. First support is seen at US$5.60 and then at US$5.55.

 

There were five deliveries reported against the September contract Wednesday.