December 9, 2008


CBOT Corn Outlook on Tuesday: Down 2-4 cents; profit-taking, dollar pressures



Chicago Board of Trade corn futures are expected to open slightly lower Tuesday following overnight losses on profit-taking amid a lack of supportive fundamental news.


Corn is called 2 to 4 cents lower. In overnight trading, December corn was down 3 1/4 cents to US$3.11 per bushel, March corn was down 3 1/4 cents to US$3.26 3/4 and May corn was down 4 1/4 cents to US$3.36 1/4.


Traders said corn was poised to give back some of its gains from Monday's rally. The dollar is stronger, which is bearish for commodities because it makes exports less attractive.


Open interest dropped Monday despite the rally. Continuing liquidation is "ratcheting down" expectations for a winter rally, Farm Futures said in a morning commentary. Analysts say the market will soon begin to focus more on next year's planted acreage for grains and soybeans.


Analysts also see positioning ahead of Thursday's supply and demand report from the U.S. Department of Agriculture. Traders and analysts expect the report will increase projected ending stocks for corn due to weakened export and ethanol demand.


"Keep in mind that the current USDA 2008-09 ending stocks figure for U.S. corn at 1.124 billion bushels will no doubt be hiked in Thursday's supply-demand report, but not near the 1.50-1.60 billion figure that more reflects reality," Western Milling analyst Joel Karlin said in a newsletter.


Feed demand is also weak, traders note, due in part to an abundance of feed wheat. A trader said that if corn rallies sharply, it risks further eroding feed demand.


Export inspections reported Monday were weak for corn as well as wheat and soybeans, traders and analysts said. Despite the lack of supportive demand news, a trader said the market begins to look cheap below US$3.


"You're finally reaching some points where fundamentally, you're cheap enough," a trader said.


In other news, deliveries remain heavy, with 889 deliveries reported against the December contract.


The next downside price objective is to push and close prices below major psychological support at US$3.00. The next upside price objective is to push and close prices above solid technical resistance at US$3.50.


First resistance for March corn is seen at Monday's high of US$3.34 3/4 and then at US$3.40. First support is seen at US$3.25 and then at US$3.20.

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