October 7, 2008

 

CBOT Corn Outlook on Tuesday: Steady to 2 cents higher; outside markets firm

 

 

Chicago Board of Trade corn futures are expected to open flat to two cents higher Tuesday following overnight trends and support from outside markets, analysts said.

 

In overnight trading, December corn was up 1 cent to US$4.25 per bushel and March corn was down 1/2 cent to US$4.42.

 

The market traded both sides in overnight trading before settling flat, while wheat and soybeans both gained. Outside influences, which were strongly bearish Monday, appeared to be supportive to corn Tuesday, traders said.

 

"I'd be surprised if we don't see some stability given the tone in the outside markets," a trader said.

 

Higher crude oil and a weaker dollar should provide support, traders said, and equities also appear to be rebounding. Traders added that Monday's 30-cent, limit-down drop in corn was overdone, creating a "turnaround Tuesday" sentiment.

 

Many analysts say without a frost in the forecast, the crop is clear from the threat of significant frost threat, despite the fact that it remains behind schedule.

 

The U.S. Department of Agriculture said Monday that 14% of the corn crop was harvested as of Oct. 5, up from 9% last week and below the five-year average of 30%. Last year, 39% of the crop had been harvested.

 

Seventy-three percent of the corn crop was mature, up from 52% last week and the five-year average of 89%, according to USDA.

 

Rain and showers Monday and Tuesday will likely cause harvest delays, DTN Meteorlogix said. The next chance for rain comes early next week, especially likely in the western areas, and there are no significant cold weather threats during the next seven days, according to the forecast.

 

Some analysts and meteorologists say a frost threat can't be completely discounted, however. Mike Zuzolo, senior analyst for Risk Management Commodities, cited a forecast of a killing freeze in the western corn belt over the weekend and into the central and eastern corn belt early next week.

 

The next downside price objective is to push and close December prices below major psychological support at US$4.00, a technical analyst said. The bulls' next upside price objective is to push and close prices above resistance at US$4.50.

 

First resistance for December corn is seen at US$4.30 and then at US$4.40, the technical analyst said. First support is seen at US$4.20 and then at US$4.10.

 

Open interest was steady Monday despite the sharp break, a sign that the ongoing liquidation in the market was met either by new short positions entering the market or end-user buying.

 

Tuesday's trading limit will be an expanded 45 cents following Monday's limit-down drop. The market's overnight low of US$4.16 in the December contract was a 27.5% drop from an intraday high on Sept. 24.