December 8, 2009

 

CBOT Corn Outlook on Tuesday: Higher on support from soy, midwest storm

 

 

Chicago Board of Trade corn futures are expected to open slightly higher Tuesday as continued strength in soybeans and a Midwestern snowstorm support the market.

 

Corn is called 2 to 4 cents higher. In overnight trade, December corn was up 2 3/4 cents to US$3.71 1/2 per bushel and March corn was up 2 1/4 cents to US$3.86.

 

The market extended its recent slide on Monday despite gains in soybeans, but as soybeans continue to surge, that will limit further losses in corn, traders said.

 

A storm that will dump snow, rain and high winds on the Midwest over the next two days will continue to stall what's left of the harvest. The U.S. Department of Agriculture said that the corn harvest was 88% complete as of Sunday, up from 79% the prior week.

 

Traders were expecting around 90% to be harvested, although estimates varied from 86% to 92%.

 

The snow and wind raises concerns that the remaining corn could lodge, making it more difficult to harvest, analysts said.

 

Mike Zuzolo, president of Global Commodity Analytics and Consulting, said that the storm could improve basis--the difference between cash and futures prices--in the western corn belt, which "could go a long way in helping the trade psychology."

 

But some analysts also say that with most of the crop harvested, the trade is turning its attention to other factors.

 

"We're traded this slow harvest pace for quite some time," said Shawn McCambridge, senior grains analyst for Prudential Bache. He added that freezing cold temperatures would actually benefit some farmers, by firming up the soil and allowing them to take their equipment out into the fields.

 

Analysts say there could be some positioning ahead of Thursday's supply and demand report, which the USDA will release at 8:30 a.m. EST.

 

"However, traders appear to be trying to look behind those numbers to the big January reports, when the government updates its production forecast," Farm Futures Senior Editor Bryce Knorr said in a morning commentary. "With 1.5 billion bushels of corn still in 'temporary outside storage,' the final size of the crop remains highly uncertain, especially on the heels of this week's storm."

 

In contrast to soybeans, corn's demand remains weak, particularly for exports, analysts say.

 

The next upside price objective is to push and close prices above major psychological resistance at US$4.00 a bushel. The next downside price objective for the bears is to push and close prices below solid technical support at the November low of US$3.72 1/2 a bushel.

 

First resistance for March corn is seen at US$3.90 and then at Monday's high of US$3.93 1/2. First support is seen at Monday's low of US$3.82 1/2 and then at US$3.79.