December 12, 2008

 

CBOT Corn Outlook on Friday: Down on overnight losses; outsides eyed

 

 

Chicago Board of Trade corn futures are expected to open lower following overnight losses, with bearish outside markets likely to set the tone, analysts said.

 

Corn is called 10 cents to 12 cents lower. In overnight trading, December corn was down 13 cents to US$3.25 per bushel, March corn was down 12 1/2 cents to US$3.39 and May corn was down 14 1/2 cents to US$3.48.

 

Sharply lower crude oil, which is bearish because of corn's tie to ethanol, pushed corn lower overnight. U.S. stocks are also expected to dip Friday, which could add to the pressure.

 

However, a floor trader said corn's direction would change if outside markets shift, and noted that the dollar was weaker, which is typically supportive for commodities.

 

"If the dollar really starts getting smacked, it will probably underpin things," a trader said.

 

The overnight losses came after the market shook off a bearish government estimate of U.S. ending stocks Thursday and climbed along with crude oil, which some analysts and traders say the market has been following closely.

 

Thursday's gains despite the USDA report supported the notion that the market has made a short-term bottom.

 

"The market has factored in material demand destruction and henceforth shall begin to concern itself with thoughts of how much less acreage shall be planted in '09 to beans, wheat and corn; how much less fertilizer will be applied to the corn crop given the recession and farmers concerns about that recession, and how severe shall be the stringent bank lending policies upon farmers everywhere," Dennis Gartman said in Thursday's Gartman Letter.

 

But analysts said this week's rally has not been due to new buyers entering the market. Open interest in corn rose less than 2,000 contracts on Thursday's rally, which Farm Futures said in a morning commentary was "hardly a vote of confidence from the bulls."

 

"Thursday's rally appeared to be driven by a lack of new selling," a trader said.

 

A higher close on Friday that would produce a bullish weekly high close would be a solid clue that a near-term market low is in place, a technical analyst said.

 

The next downside price objective is to push and close March prices below solid technical support at US$3.25, the technical analyst said. The next upside price objective is to push and close prices above solid technical resistance at US$3.75.