October 24, 2008
CBOT Corn Outlook on Friday: Down sharply as financial markets swoon
A plunge in equities and sizable overnight losses will likely send Chicago Board of Trade corn futures sharply lower at Friday's open, traders said.
Corn is called 18 to 20 cents lower. In overnight trading, December corn was down 16 3/4 cents at US$3.73 1/2 per bushel and March corn was down 14 cents at US$3.92 1/4.
Outside markets are the dominant story, traders said, as U.S. stock futures dropped to their downward limit, overseas stock markets plummeted and gold fell overnight. Even a decision announced overnight by the Organization of Petroleum Exporting Countries to cut production by 1.5 million barrels failed to stem the losses.
Hedge funds are "said to be under orders to liquidate more positions across a broad spectrum of markets, as newly regulated investment banks force them to cut back on the leverage they typically use," Farm Futures said in a morning commentary.
"These funds are liquidating everything, everywhere, and they're not stopping," a CBOT grains trader said.
Corn had actually climbed initially during the overnight session. Panicky Asian markets likely prompted a change in direction, a trader said.
Corn came within one cent of its low last week of US$3.71 in the December contract overnight. A trader said a close Friday below US$3.84 would set a new low for the close, and be another bearish technical signal.
The overnight losses erased gains from a modest "relief rally" on Thursday. The market has found some support from cold, wet weather in the U.S. corn belt, which is causing further delays in a harvest that is already behind, analysts said.
Some farmers might be faced with the possibility of waiting until their soggy fields freeze before getting equipment into the fields to complete the harvest, analysts said. The harvest delays could cause more downed corn, some analysts say, although Emerson Nafziger, corn specialist with the University of Illinois, said weak plants would likely have fallen down already.
Strengthening basis has also offered some market support, traders said, as producers balk at selling at prices that have fallen sharply in recent weeks.
The next downside price objective is to push and close prices below solid technical support at last week's low of US$3.71, a technical analyst said. The next upside price objective is to push and close prices above major psychological resistance at US$4.00.