October 31, 2008


CBOT Corn Outlook on Friday: Down on weak demand, overnight weakness



Chicago Board of Trade corn futures are expected to open 4 to 6 cents lower Friday on overnight losses and a stronger dollar, analysts said.


In overnight trading, December corn was up 5 1/2 cents to US$4.04 per bushel and March corn ended up 4 3/4 cents to US$4.22 3/4.


The market's rally during the first half of the week stalled Thursday, as weak demand, the dollar and profit-taking pressured corn. Follow-through selling held prices down overnight, analysts said.


"Demand destruction" looms over the market, as the trade worries about the effects of a global recession.


"It seems that in the short-term, any rally has been downplayed by the slowdown in demand for commodities," said Citigroup analyst Terry Reilly.


Thursday's weak export sales report was seen as a sign of continued poor demand. The U.S. corn market is facing competition from feed wheat and from other corn on the market, analysts said. Brazilian sales in particular have been strong, Reilly said.


The dollar, whose weakness earlier in the week helped fuel the rally, has rebounded, causing the market to relinquish some of its gains. A stronger dollar makes U.S. exports less attractive.


In other export news, the Korea Feed Association, or KFA, has bought 55,000 metric tonnes of U.S. corn from trading house Archer Daniels Midland Co. (ADM) in a private deal concluded late Thursday, a trader in Seoul said Friday.


The DTN Meteorlogix forecast calls for dry, warm weather across the U.S. corn belt over the next several days, helping farmers catch up on a harvest that is far behind in most areas. Rain is possible in northwest areas of the corn belt Sunday and Tuesday.


Reilly said farmers are currently making good progress on the harvest. He estimates Monday's crop progress report from the U.S. Department of Agriculture will show harvest at 55% complete, which would be up from 39% the prior week.


The next downside price objective is to push and close prices below psychological support at US$4.00. The next upside price objective is to push and close prices above solid technical resistance at Thursday's high of US$4.33.


First resistance for December corn is seen at US$4.15 and then at US$4.20 3/4. First support is seen at Thursday's low of US$4.02 1/4 and then at US$4.00.


The market's high volatility in recent weeks has prompted traditional buyers to stay on the sidelines, analysts said.

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