December 8, 2008
CBOT Corn Outlook on Monday: Up on outside markets, oversold conditions
Chicago Board of Trade corn futures are poised to open higher Monday following overnight gains as the market gets support from equities and a weaker U.S. dollar, analysts said.
Corn is called 10 to 13 cents higher. In overnight trading, December corn was up 13 cents to US$3.06 1/2 per bushel, March corn was up 12 1/2 cents to US$3.21 3/4 and May corn was up 11 1/2 cents to US$3.30 3/4.
U.S. stocks rose after the grains markets closed Friday, and overseas equities markets were higher overnight, setting the tone for Monday's open, analysts said. The dollar, whose strength helped push commodities lower last week, is weakening Monday, and crude oil is higher.
With sharp losses in corn recently, the market is oversold, said Shawn McCambridge, senior grains analyst with Prudential-Bache. But the market needs outside support "because we really don't have much in the way of fundamental support coming into the market right now."
Weak demand is limiting any upside potential, analysts said. Export sales have been weak, the ethanol industry is struggling, and corn faces competition from feed wheat, which is in abundance.
"Swiftly declining oil prices and layoffs across the board are further depressing demand for corn as its demand in production of alternative fuel slows," Epitome Global Services said in its weekly commodity outlook issued Monday. "Exports have diminished as international trade has almost come to a standstill due to poor credit conditions."
Despite the weak fundamentals, with March corn down around US$3, "I don't think we're going to see aggressive sellers down in this area," McCambridge said.
Deliveries remain heavy, with 1,044 deliveries reported against the December futures contract.
Speculative funds added 677 contracts to their long positions and 2,611 contracts to their short positions, putting them net short 43,217 contracts, the Commodity Futures Trading Commission reported Friday.
The supplemental commitment of traders report also showed that commercial funds cut 4,344 contracts from their long positions and 6,435 from their short positions, putting them net short 124,067 contracts. Index funds cut 247 contracts from their long positions and added 144 contracts to their short positions, putting them net long 232,577 contracts, the CFTC said.
The next downside price objective is to push and close prices below major psychological support at US$3.00, a technical analyst said. The next upside price objective is to push and close prices above solid technical resistance at US$3.25.
Epitome Global Services said prices are likely to "witness some more downside before stabilizing, to trade within a range" between US$2.80 and US$3.40.