September 23, 2008

 

CBOT Corn Outlook on Tuesday: Lower as outside markets dictate direction

 

 

Chicago Board of Trade corn futures are expected to open lower Tuesday as the market continues to follow volatile outside influences, traders said.

 

Corn is called 3 to 5 cents lower. In overnight trading, December corn was down 3 1/4 cents to US$5.55 1/4 per bushel and March corn fell 4 3/4 cents to US$5.71 1/2.

 

The trade continues to look to outside factors for direction amid a lack of fundamental news, traders said. A stronger dollar and a retreat in crude oil - following it's largest-ever gain Monday - could keep prices lower Tuesday, they said.

 

A trader said he expects "a little bit of a retracement after yesterday's buoyancy."

 

The trade remains cautious given all of the recent turmoil and volatility in equities and commodities, traders and analysts said. Analysts noted that open interest fell by more than 3,000 contracts Tuesday despite gains of more than 15 cents.

 

Although not seen as a big factor at the moment, analysts say the market may soon start to pay more attention to fundamentals. Corn development continues to lag, according to Monday's crop progress report from the U.S. Department of Agriculture.

 

The USDA said 33% of the U.S. corn crop was mature, down from 76% in 2007 and the average of 63%. In Iowa, the top corn-growing state, 23% of the crop was mature, down from 81% last year and the average of 68%.

 

In Illinois, 31% of the crop was mature, down from 94% last year and the average of 77%, according to the USDA.

 

Good weather could help the crop reach its yield potential despite the late season, analysts and agronomists said.

 

The DTN Meteorlogix forecast says warm temperatures and only light showers will favor maturing corn through next Sunday. Cooler temperatures and somewhat wetter conditions early next week would be unfavorable, but likely brief.

 

There is some speculation about a frost next week, but traders said the possibility is still remote and would likely only affect northern areas of the U.S. corn belt.

 

"The reality is it's a great week this week," a trader said. "You're really going to advance maturity."

 

Prices are still in a four-week-old downtrend on the daily bar chart despite gains Friday and Monday, a technical analyst said. The next upside price objective is to push and close December prices above resistance at US$5.80 1/4.

 

The next downside price objective is to push and close prices below solid technical support at last week's low of US$5.24.

 

First resistance for December corn is seen at Monday's high of US$5.64 1/2 and then at US$5.80 1/4, the technical analyst said. First support is seen at US$5.50 and then at US$5.40.