October 8, 2008


CBOT Corn Outlook on Wednesday: Lower; trade eyes direction of equities



Chicago Board of Trade corn futures are expected to open lower following overnight losses and outside markets, as the trade looks for direction from equities following action by major central banks intended to calm the financial markets, analysts said.


Corn is called 3 to 5 cents lower. In overnight trading, December corn was down 5 cents to US$4.12 per bushel and March corn was down 3 3/4 cents to US$4.29 3/4.


The Federal Reserve, European Central Bank and other major central banks on Wednesday morning announced coordinated cuts in target interest rates. The Fed's open market committee voted unanimously to cut its target federal funds rate 50 basis points to 1.5%.


The latest dramatic action to help stem a growing global financial crisis was expected to help equities rebound, but after an initial rally, U.S. stock futures fell.


Traders said the direction of the corn market at the open likely depends on how the equities are trading.


"I see (opening) calls changing every 10 minutes" based on equities, said Brian Hoops, president of Midwest Market Solutions. A lower close in the stock market following the rate cut would be bearish, he said.


Adding to the jitters in world financial markets, the Japanese stock market lost almost 10% overnight.


Corn had rallied overnight and was more than 10 cents higher before retreating. A trader said the market is "acutely oversold" after sharp losses the past several days.


"I'm not so sure you have much conviction on the downside anymore," the trader said.


The market is likely to find support the closer it gets to US$4, traders said.


The U.S. Department of Agriculture's crop production and supply and demand reports, to be released Friday, would normally be highly anticipated, but now are having little influence on the market. Analysts estimate on average yield and production numbers to remain almost unchanged from the government's September estimates.


It would take a big shift in the projections to get the trade's attention, traders said.


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 next upside price objective is to push and close prices above resistance at US$4.50.


First resistance for December corn is seen at today's high of US$4.29 3/4 and then at US$4.40, the technical analyst said. First support is seen at Tuesday's low of US$4.12 3/4 and then at US$4.00.

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