September 19, 2008

 

CBOT Corn Outlook on Friday: 5-7 cents higher; fundamentals played down

 

 

Chicago Board of Trade corn futures are expected to open higher Friday, as government action to calm the financial markets provides spillover support for commodities, traders said.

 

Corn is called 5 to 7 cents a bushel higher. December corn was up 7 3/4 cents to US$5.35 a bushel and March corn was up 10 1/2 cents to US$5.53 3/4.

 

Analysts say corn could rebound after sharp losses Thursday, as the market continues to be overwhelmed by outside influences. U.S. government action to quell broader economic fears, including a short-term ban on short selling, has boosted the stock market and supported other markets, including crude oil.

 

"Today is just another day when financials will dominate price action, rather than changes in the weather forecast," Citigroup analyst Terry Reilly said.

 

Fundamentals are a minor factor in the market, most analysts say, although weak demand is among the bearish factors. Export sales reported Thursday were at the low end of expectations, and ethanol producers are suffering, which could damp corn demand, analysts said. The ethanol industry is "dog-paddling," struggling to stay afloat, one analyst said.

 

Funds battered by this week's financial turmoil continue to liquidate, traders said. Open interest in corn dropped by more than 12,500 contracts Thursday. A trader said the continuing liquidation and outside chaos make it tough to predict what the corn market will do.

 

U.S. corn belt weather forecasts are good for the crop and bearish for the market, analysts said.

 

Private weather firm DTN Meteorlogix said that "dry weather for at least the next five days along with mostly above-normal temperatures will help fields recover from recent rains and will help crops continue to move towards maturity." There is no significant cold weather in the forecast.

 

Recent moderate temperatures are good for the crop, analysts said.

 

"The cool weather we've seen over the last seven days should have facilitated the development of the crop a little bit," Reilly said.

 

The next upside price objective is to push and close prices above resistance at Thursday's high of US$5.60, a technical analyst said. The next downside price objective for the bears is to push and close prices below major psychological support at US$5.00.