October 27, 2008


CBOT Corn Outlook on Monday: Down 4-6 cents on financial woes



Chicago Board of Trade corn futures are expected to open lower Monday on a bearish plunge in equities and a stronger dollar, analysts said.


Corn is called to open 4 to 6 cents lower. In overnight trading, December corn was down 5 3/4 cents to US$3.67 per bushel and March corn was down 6 1/4 cents to US$3.82 1/2.


The market's downward trend is expected to continue at the open, as corn and other grains are dominated by fears of a global recession. A plunge in Asian markets weighed on U.S. stock futures overnight, and other commodities such as gold and crude oil continue to drop.


"We just haven't been able to generate any sustained strength against the financials," said Shawn McCambridge, senior grains analyst for Prudential-Bache.


Traders are also "gun-shy" after getting burned multiple times in recent weeks, re-entering the market on the belief the market had hit a bottom, only to watch corn dip to a new low, McCambridge said.


Friday's close at US$3.72 3/4 was corn's lowest closing level in 21 months, a technical analyst said, and prices are in a 16-week-old downtrend on the daily bar chart.


The market continued to dip below technical support overnight, closing below US$3.71, which had been the previous low for October.


The bulls' next upside price objective is to push and close prices above major psychological resistance at US$4, a technical analyst said. Resistance is seen at US$3.80 and then at US$3.90.


Speculative funds cut 6,393 contracts from their CBOT corn long positions and added 6,911 contracts to their short positions, putting them net short 6,933 contracts, the Commodity Futures Trading Commission reported Friday.


It is the first time those funds have been net short since early 2006, Farm Futures said.


The supplemental commitment of traders report also showed commercial funds increased their long positions by 3,786 contracts and cut 12,498 contracts from their short positions, putting them net short 171,234 contracts. Index funds cut 8,398 contracts from their long positions and added 3,482 contracts to their short positions, putting them net long 259,625 contracts, the CFTC said.


The market is unable to give much attention to news about the crop due to all of the outside market noise, analysts said. Harvest remains well behind schedule, however, and "gale force winds didn't do crops remaining in the field any favors, likely increasing downed corn, keeping farmers out of even dry fields," Farm Futures said.