November 25, 2008

 

CBOT Corn Outlook on Tuesday: Down slightly in correction; outsides eyed

 

 

Chicago Board of Trade corn futures are expected to open slightly lower Tuesday as the market appears poised for a modest correction following Monday's gains, traders said.

 

Corn is called 2 to 4 cents lower. In overnight trading, December corn was down 2 3/4 cents to US$3.51 3/4 per bushel and March corn was down 2 3/4 cents to US$3.68 1/4.

 

Corn's direction will continue to depend on outside markets, traders said. Those markets appeared to be bearish earlier in the morning as the dollar was stronger and crude oil was falling, but those markets have since changed direction.

 

If crude oil is higher at the open, that "could minimize the negativity" for corn, the trader said.

 

An analyst said the dollar could continue to show weakness in the short-term, giving corn and other commodities a chance to rally. A weaker dollar makes U.S. exports more attractive.

 

"There's only one thing that concerns us - follow through," Mike Zuzolo, senior analyst with Risk Management Commodities, said in a market commentary. "We really want to see the equities and commodities to build upon these gains (Tuesday), and the dollar to simultaneously weaken with the Bonds."

 

Soybeans remain stronger fundamentally than corn, analysts said. Corn lost open interest Monday on the rally, and a trader said little movement in the spreads Monday "tells me that it was a flat price recovery" rather than any lift in demand.

 

Corn demand remains weak. Concerns about an influx of feed wheat in the market is adding pressure to the market, and analysts also noted that Brazil is offering corn for export at steep discounts in order to make room for harvest.

 

On Monday, Argentina said it still has 1.78 million metric tonnes of wheat available for export from the 2007-08 crop, while just 7,500 tonnes of corn of corn remains.

 

Weather in Argentina, which has been watched by traders recently as hot, dry weather threatens the crop, is supposed to be better this week, with rain in the forecast, traders said.

 

The USDA said 89% of the corn crop was harvested as of Sunday, up from 78% last week but below the average of 97%. The progress exceeded estimates from traders, who predicted harvest would be 84% to 88% complete.

 

The next downside price objective is to push and close March prices below solid technical support at last week's low of US$3.52 1/4, a technical analyst said. The next upside price objective is to push and close prices above psychological resistance at US$4.00.

 

First resistance for March corn is seen at Monday's high of US$3.77 3/4 and then at US$3.85. First support is seen at US$3.65 and then at US$3.60.