October 30, 2008

 

CBOT Corn Outlook on Thursday: Down slightly as rally runs out of gas

 

 

Chicago Board of Trade corn futures are expected to be slightly weaker on Thursday's open as the market looks for fuel to sustain corn's rally this week.

 

Corn is called 1 to 2 cents lower. In overnight trading, December corn was down 1/4 cent to US$4.20 1/2, March corn was up 1/4 cent to US$4.38 1/2 and May corn was up 3/4 cent to US$4.50 3/4.

 

The market had initially rallied on follow-through strength from Wednesday's 30-cent climb, but relinquished its gains later in the overnight session.

 

"The market had a run there, and it ran out of gas," said Jerry Gidel, analyst with North America Risk Management Services.

 

The market has been closely tracking outside markets, particularly equities, in recent weeks, but it needs some fresh news to extend its rebound, a trader said.

 

"We can't just keep trading the stock market all the time," he said.

 

He added that profit-taking cut into the overnight gains.

 

After climbing more than 50 cents this week, corn has building technical momentum, with some traders and analysts saying a seasonal low has been put in place. Gidel thinks the market has made a bottom, although he notes there are "lots of economic things to keep people nervous at this point." Concerns about a global recession and its effect on demand have weighed on commodities in recent weeks.

 

Export sales reported Thursday morning were "definitely not impressive," Gidel said.

 

Net export sales for the week ended Oct. 23 were reported at 413,100 metric tonnes, down from 789,600 metric tonnes last week. Analysts had estimated sales of between 600,000 and 1 million metric tonnes.

 

DTN Meteorlogix said weather will remain favorable for the harvest for at least the next five days. Wet weather by the middle of next week will likely lead to harvest delays, however.

 

The next downside price objective is to push and close December prices below psychological support at US$4.00. The next upside price objective is to push and close prices above solid technical resistance at last week's high of US$4.27 3/4.

 

First resistance for December corn is seen at US$4.27 3/4 and then at US$4.42 1/2. First support is seen at US$4.09 3/4 and then at US$4.00.

 

Although prices climbed by 30 cents, the exchange-imposed daily trading limit on Wednesday, Thursday's limit will remain at 30 cents, a CME Group spokeswoman said. A trader said the limit wasn't being expanded because contracts weren't bid at the limit at Wednesday's close.