October 22, 2008


CBOT Corn Outlook on Wednesday: Expected to drop on dollar, equities


Chicago Board of Trade corn futures are expected to open lower Wednesday after falling below US$4 overnight on outside market pressure.


Corn is called 14 to 16 cents lower. In overnight trading, December corn was down 15 1/2 cents to US$3.95 1/2 per bushel and March corn dropped 16 cents to US$4.11 3/4.


Outside markets will continue to set the market's direction, traders said, as a stronger dollar and lower equities are combining to create a bearish environment for commodities. The dollar's strength makes U.S. exports less attractive, and is outweighing harvest delays that are supportive to the market.


The stock market has heavily influenced commodities' direction in recent weeks as traders worry about the possibility of a global recession and its effect on demand.


The drop overnight sent corn below technical support at the week's low at US$4.06 1/2 and psychological support at US$4. A technical analyst said the next upside price objective is to push and close December prices above solid resistance at US$4.50.


Farmers remain reluctant to sell given prices that have fallen sharply in recent weeks, but strengthening basis is offering some underlying support, analysts said.


DTN Meteorlogix says in its forecast that rain and cool weather will likely delay crop harvests through the western U.S. corn belt during the next few days. Producers in eastern areas could still do some work Wednesday and early Thursday.


The U.S. Department of Agriculture reported this week that harvest remains behind schedule, with just 29% of the crop harvested as of Wednesday, down from 58% last year and the average of 53%.


Although the harvest is moving at a slow pace, some analysts said that what is being harvested has better-than-expected yields, adding to pressure on the market. Harvest pressure will continue to weigh on prices, analysts said.


There is speculation among traders that the market hit its seasonal lows last week, when it dropped as low as US$3.71 in the December contract. But some analysts say it is too soon to call a bottom.


"There are some people saying last week's washout was the low," an analyst said. "Well, I wish I was sure of that."

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