October 6, 2008


CBOT Corn Outlook on Monday: Down sharply on global financial turmoil



Chicago Board of Trade corn futures are expected to open sharply lower Monday as the trade braces for another day of liquidation following overnight losses amid a gloomy economic outlook.


In overnight trading, December corn was down 23 cents to US$4.31 per bushel and March corn was down 23 cents to US$4.49 1/2.


A sharply higher dollar is expected to weigh across all commodities, analysts said, as concern about the European economy prompts investors to seek out the greenback. A stronger dollar makes U.S. exports less attractive.


Concern about the economy in the U.S. and worldwide is also bearish for commodity demand, analysts say. Soybeans and wheat were sharply lower overnight, and crude oil was down sharply in morning trading.


Corn has plunged amid the economic uncertainty of recent weeks. The overnight low of US$4.27 3/4 cents was down almost US$1.50 from a Sept. 24 intraday high of US$5.74.


"Targets for corn are becoming harder to find after last week's collapse and the overnight decline," Farm Futures said in a morning commentary. "Support below the market now for December futures is at US$4.20 and US$4.05 later this week."


But a technical analyst said the market is still short-term oversold, technically, and due for a corrective bounce.


Although the trade is expected to focus on outside influences rather than corn fundamentals, analysts add that the market has little support from the weather.


DTN Meteorlogix said frost and isolated freezing temperatures in the northern part of the eastern U.S. Midwest during the weekend "probably did little damage to crops." The forecast calls for rain early this week that will likely mean delays to field work and harvesting.


But analysts say a lack of a significant frost threat remains good for the crop and bearish for the market.


The corn market's plunge has prompted some modest commercial buying, but end-users see little urgency as the market shows little sign of rebounding, analysts said.


The Commodity Futures Trading Commission reported Friday that speculators and index funds continue to exit their long positions. Speculative funds cut 11,301 contracts from their CBOT corn long positions and added 10,713 to their short positions, putting them net long 40,913 contracts, the CFTC said.


The supplemental commitment of traders report also showed commercial funds cut 38,594 contracts from their short positions and added 13,806 contracts to their long positions, putting them net short 239,077 contracts. Index funds cut 11,042 contracts from their long positions and added 1,047 contracts to their short positions, putting them net long 305,839 contracts, the CFTC said.

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