September 8, 2008

 

CBOT Corn Outlook on Monday: Up slightly in rebound; crude supports

 

 

Chicago Board of Trade corn futures are expected to open higher Monday on overnight gains amid short-covering and support from the energy markets, analysts said.

 

Corn is called 2 to 4 cents higher. In overnight trading, September corn was up 10 1/2 cents to US$5.42 per bushel, December corn was up 3 cents to US$5.51 1/2 and March corn was up 3 1/4 cents to US$5.70 1/2.

 

Prices trimmed gains late in the overnight session on a climbing dollar. But corn should get spillover strength Monday from the crude-oil market, which is climbing as Hurricane Ike threatens the U.S. Gulf coast, analysts said.

 

After falling sharply late last week, the market is technically oversold, said Don Roose, president of U.S. Commodities in West Des Moines, Iowa.

 

"The market is looking forward to the report on Friday morning, so there's some short-covering from that," Roose said.

 

The U.S. Department of Agriculture will issue new crop-production estimates Friday morning. Many traders and analysts expect a drop in production from the government's August estimates, although private analytical firm Informa Economics last week projected a yield of 156.5 bushels per acre, up from the USDA's current projection of 155 bushels.

 

"Private estimates are coming out with larger numbers, on-the-ground reports are telling us that's not necessarily the case," Roose said.

 

Weather is somewhat favorable to the crop, with recent rainfall giving some areas a late boost, analysts said.

 

DTN Meteorlogix said there is "no significant risk of a season-ending freeze for the Midwest region during the next 10 days." It added that rainfall associated with cold fronts will favor late-filling crops, while Hurricane Ike's impact on the corn belt remains uncertain.

 

The hurricane is supporting crude oil owing to fears the storm will strike key infrastructure in the Gulf.

 

Fund liquidation remains a factor, with the surging dollar and fears of slowing global demand pressuring corn and other commodities, analysts said.

 

Speculators cut 6,956 contracts from their CBOT corn long positions and cut 3,013 contracts from their short positions, leaving them net long 58,388 contracts, the Commodity Futures Trading Commission reported Friday.

 

The supplemental commitment of traders report also showed commercial funds cut 13,459 contracts from their long positions and 28,563 from their short positions, putting them net short 305,639 contracts. Index funds cut 3,026 from their long positions and added 11 contracts to their short positions, putting them net long 348,108 contracts, the CFTC said.

 

There were 10 deliveries reported against the September contract Monday.

 

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 a downside price gap on the daily bar chart. The next downside price objective for the bears is to push and close prices below solid technical support at US$5.25.

 

Resistance for December corn is seen at US$5.55. First support is seen at Friday's low of US$5.42 1/2 and then at US$5.35.