December 15, 2008


CBOT Corn Outlook on Monday: Up 7-9 cents on crude, technical momentum



Chicago Board of Trade corn futures are poised to open higher Monday following overnight gains on technical momentum and supportive outside markets.


Corn is called 7 to 9 cents higher. In overnight trading, March corn was up 9 1/4 cents to US$3.82 3/4 per bushel, May corn was up 7 3/4 cents to US$3.92 1/2 and July corn was up 8 cents to US$4.03 1/4.


Outside markets will set the tone, traders said. Strong gains in crude oil are supportive because of corn's tie to ethanol, and a weaker dollar makes U.S. exports more attractive.


"I think it's still a macro-driven rally," a trader said.


But corn also has its own momentum, traders and analysts add. The March contract rallied 64 1/4 cents last week, and surged on Friday following a private group's estimate that corn acreage will drop in 2009. Follow-through buying prompted gains overnight, a trader said.


The market is also buoyed by increasing upside technical momentum, and growing ideas that corn has set a bottom. Corn continued to climb last week even after the U.S. Department of Agriculture projected increased ending stocks in its monthly supply and demand report on Thursday.


Strong export sales reported last week added to the bullish sentiment, a trader said.


Friday's price action is a technical clue that a near-term market low is in place and the bulls do have some fresh upside near-term technical momentum, a technical analyst said.


A trader said Friday's acreage report, from Informa Economics, served as a reminder that "corn was probably still cheap, ratio-wise, to beans." But he said soybeans still have tighter supply and better demand than corn.


A continued dry weather pattern in Argentina and Brazil is also supporting the market, the trader added.


The next downside price objective is to push and close March prices below solid technical support at Friday's low of US$3.37. The bulls' next upside price objective is to push and close prices above major psychological resistance at US$4.00.


Speculative funds added 2,207 contracts to their CBOT corn long positions and cut 4,709 contracts from their short positions, putting them net short 36,301 contracts, the Commodity Futures Trading Commission said Friday.


The supplemental commitment of traders report also showed that commercial funds cut their long positions by 8,284 contracts and their short positions by 6,208 contracts, putting them net short 126,144 contracts. Index funds cut 1,229 contracts from their long positions and added 3,829 to their short positions, putting them net long 227,519 contracts, the CFTC said.

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