September 26, 2008

 

CBOT Corn Outlook on Friday: Down 3-5 cents; weak demand, nervous trade

 

 

Chicago Board of Trade corn futures are expected to open lower Friday as the market remain skittish while awaiting a resolution to the crisis in the financial sector, traders said.

 

Corn is called 3 to 5 cents lower. December corn ended down 5 3/4 cents to US$5.52 1/2 per bushel, and March corn ended down 5 1/2 cents to US$5.70 1/2.

 

The trade continues to watch for news of the government's plans to bail out the financial sector. Another plunge in the financial markets would spill over into commodities, traders said.

 

The market is technically weak, said John Kleist, broker/analyst for Allendale in McHenry, Ill. He noted that corn failed in a "limp attempt" to take out its 50-day moving average in the December contract this week. Prices have remained below that average since mid-July.

 

Volume has been remained light in the corn market, analysts and traders said.

 

"There's no leadership right now," Kleist said. "And that leads to nervousness, and nervousness leads to weakness."

 

The market is not trading fundamentals right now, many analysts say, although traders note weather that has been warm, dry favorable weather for the crop this month.

 

The DTN Meteorlogix forecast calls for favorable weather to continue for another 3 to 5 days, followed by unfavorable conditions for maturing crops. A light freeze, especially in northern areas of the U.S. Midwest, can not be ruled out, according to the forecast.

 

Kleist said in the current economic environment there is concern about corn demand for ethanol, feed and exports.

 

"I think demand could be the issue, rather than supply, because of all the economic uncertainty," said John Kleist, broker/analyst for Allendale in McHenry, Ill.

 

The next upside price objective is to push and close prices above resistance at US$5.80 1/4, a technical analyst said. The next downside price objective for the bears is to push and close prices below solid technical support at this week's low of US$5.35 1/4.

 

First resistance for December corn is seen at Thursday's high of US$5.65 1/2 and then at US$5.70. First support is seen at Thursday's low of US$5.55 and then at US$5.50.