September 29, 2008


CBOT Corn Outlook on Monday: Down 14-16 cents on outside market pressure



Chicago Board of Trade corn futures are expected to open lower Monday on outside pressure as the market continues to focus on concerns about the financial sector, analysts said.


Corn is called 14 to 16 cents lower. In overnight trading, December corn was down 15 1/2 cents US$5.27 1/2 and March corn was down 16 3/4 cents to US$5.44 1/4.


A sharply higher dollar and sharply lower crude oil will weigh on the markets, traders said. The trade remains nervous despite indications that Congress is set to pass a bailout package for the financial sector, analysts said, with looming concerns about the banking system in Europe and potential inflation caused by the U.S. government bailout.


"We are witnessing, at least for the moment, the start of a seemingly global meltdown, and even the news on the compromise legislation regarding the banking/broking/mortgage community here in the U.S. is having little if any effect," Dennis Gartman said in Monday's Gartman Letter.


Although corn's decline is due to outside pressure, "the problem is it's doing technical damage at the same time," a trader said. Corn is nearing the bottom end of a trading range in the December contract, at September's low of US$5.24, analysts said.


The trade is paying little attention to fundamentals at the moment, although traders said the weather forecast offers little threat to the crop that would boost the market.


Showers early this week may slow field work, "but this does not appear to be a major problem," according to DTN Meteorlogix. The forecast adds that cooler weather may mean lows in the 30s in some locations, "but this does not appear to be a damaging freeze."


The trade expects on average a small decrease in grain stocks in a government report set for release Tuesday.


Analysts on average expect fourth quarter corn stocks at 1.546 billion bushels in the U.S. Department of Agriculture's quarterly Grain Stocks report. The report is scheduled to be released Tuesday at 8:30 a.m. EDT.


The estimates from 13 analysts surveyed by Dow Jones Newswires ranged from 1.456 billion to 1.625 billion bushels. The government projected stocks of 1.576 billion in its Sept. 12 supply and demand report. Last year, stocks were reported at 1.304 billion.


The next upside price objective is to push and close December prices above resistance at last week's high of US$5.74, a technical analyst said. The next downside price objective for the bears is to push and close prices below solid technical support at US$5.24.


First resistance for December corn is seen at US$5.50 and then at US$5.55. First support is seen at Friday's low of US$5.39 1/4 and then at last week's low of US$5.35 1/4.


Traders said liquidation remains a feature of the market, as open interest continues to decline.


Speculative funds cut 13,168 contracts from their short positions and 945 contracts from their long positions, putting them net long 62,927 contracts, the Commodity Futures Trading Commission reported Friday.


The supplemental commitment of traders report also showed commercial funds cut their long positions by 9,114 contracts and added 2,489 to their short positions, putting them net short 291,476 contracts. Index funds cut 16,197 contracts from their long positions and 3,227 contracts from their short positions, putting them net long 317,928 contracts, the CFTC said.

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