October 9, 2008

 

CBOT Corn Outlook on Thursday: Up 8-10 cents in short-covering rally

 

 

Chicago Board of Trade corn futures are expected to climb 8 to 10 cents Thursday on overnight gains, as the market bounces amid short-covering, traders said.

 

In overnight trading, December corn was up 11 1/4 cents to US$4.38 3/4 and March corn was up 10 3/4 cents to US$4.54 3/4.

 

After going through a two-week plunge, the market rebounded Wednesday on short-covering and some commercial support, traders and analysts said.

 

"We've finally reached a point in the grains and oilseeds where you have unilateral short-covering, ahead of Friday's report," a trader said, referring to the U.S. Department of Agriculture's crop production and supply and demand reports. The reports are scheduled to be released at 8:30 a.m. EDT.

 

While a drop in open interest of about 7,000 contracts on Wednesday's rally indicated short-covering, "easing of the crisis atmosphere in financial markets is bringing a little new money back into commodities, too," Farm Futures said in a morning commentary.

 

There is "nothing dramatic" in the outside markets to set corn's direction, a trader added. But commodities would react to any drastic moves in equities, he said.

 

Net export sales climbed from the previous week, the U.S. Department of Agriculture reported Thursday. The government reported sales of 957,900 metric tonnes for the week ended Oct. 2, above analyst expectations of between 450,000 and 700,000 metric tonnes. Sales were 568,500 metric tonnes the previous week.

 

Analysts are on average not expecting significant changes to production and yield in Friday's USDA report. A trader said the market would show little reaction to any yield projection between 151 and 153 bushels per acre. The government's September estimate was 152.3 bushels per acre.

 

The DTN Meteorlogix forecast calls for drier weather in the U.S. corn belt through Saturday that should help improve conditions for the harvest. Rain may return to the region during Sunday and Monday, with heaviest rain in the western corn belt.

 

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.

 

Farm Futures said the December contract has resistance above the market at this week's US$4.53 gap on the technical charts.