September 4, 2008

 

CBOT Corn Outlook on Thursday: Down slightly on weather; lack of news

 

 

Chicago Board of Trade corn futures are expected to open slightly lower Thursday following overnight losses, with stable outside markets and a lack of fresh news making two-sided trade likely, traders said.

 

Corn is called 1 to 2 cents lower. In overnight trading, September corn was down 2 cents to US$5.44 1/2, December corn was down 3/4 cent to US$5.61 1/2 and March corn was down 1 cent to US$5.80.

 

Outside markets, particularly lower crude oil, have weighed on the market this week, and funds have continued to liquidate amid concerns that a slowing world economy would damp commodity demand. Open interest dropped more than 10,000 contracts on Wednesday.

 

But traders said strengthening of crude oil and other markets could provide some support to the market Thursday.

 

"Good stability in the outside markets could give us a mixed tone for the open," a trader said.

 

Weather is seen as a slightly bearish factor, as rainfall from the remnants of Hurricane Gustav drench much of the U.S. corn belt. Much of the crop received little rainfall in August.

 

DTN Meteorlogix calls for rain and thunderstorms is central and west-central parts of the U.S. corn belt Thursday, totaling 1 to 3 inches with locally heavier amounts. The eastern corn belt will see showers and thunderstorms Thursday night into Friday.

 

Some analysts dismiss the potential benefit of the rain at this late stage in the growing season. A trader added that the rains have already been priced into the market.

 

The trade is also sensitive to any threats of an early frost, which would be especially harmful to a crop that was planted late and needs more time to mature, traders said. With cooler temperatures in the Midwest, the fear of a frost may be providing underlying support to the market, traders said, even though forecasts are not yet calling for a frost.

 

"Some believe there should be some level of weather premium just in case," a trader said.

 

There is little fresh news Thursday, traders said. The market is watching the path of other tropical systems in the Atlantic and awaiting the Sept. 12 U.S. Department of Agriculture crop production report, which many traders expect will project less production than in the August report.

 

Deliveries against the September contract reported Thursday morning totaled 102 lots.

 

In export news, Midwest Market Solutions noted Thursday that South Korea has purchased 55,000 metric tonnes of U.S. corn.

 

The next upside price objective is to push and close prices above solid technical resistance at US$5.80 3/4, which would fill on the upside Monday's downside price gap on the daily bar chart, a technical analyst said. The next downside price objective for the bears is to push and close prices below solid technical support at Wednesday's low of US$5.50. First resistance for December corn is seen at US$5.70 and then at this week's high of US$5.77 1/4. First support is seen at US$5.55 and then at US$5.50.
   

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