COMMODITY REVIEW AND OUTLOOK

195 Route 6A, Suite 6, Orleans, Massachusetts

(December 4, 1997) CORN: SHORT TERM–Carryover selling from beans pressed corn. Talk remains that China will discontinue exports of corn, which is providing support, but poor exports continue to weigh on the market. Support is also coming from slow farmer selling. Exports will continue to dominate ideas of corn's ultimate direction. Last week's new lows in March corn may be a harbinger of still lower prices. Fears of further Asian problems, poor exports, and commercial selling suggest that corn may have problems in living up to its bullish potential. Japan is our biggest corn customer, so problems there could definitely weigh on corn. The yen fell to a five-year low. According to USDA figures, Japan has bought less than 75% of what they purchased last year. On the bullish side, if China stops exporting corn, we will be the primary supplier of corn to the world, but otherwise exports have been poor. China has had problems with their crop this year, so eventually they may remove themselves from the export arena. Corn stocks are still very tight, and should new buying emerge, or if El Nino becomes a problem, corn could have solid upside, which could carryover also to wheat and the bean complex.

RESISTANCE–Resistance basis March is near 285, 288, 295-297, 302-304.

SUPPORT–Support basis March remains near 281, 275-277, 272, 268, 265.

RECOMMENDATION–The prospect of El Nino-induced problems suggests that one keep an eye on the market for bullish developments, but the chart says sell. If bullish or a longer-term trader, or even if near-term bearish, traders might consider buying calls on weakness in the event of improved exports or weather problems abroad. A break to the 260's may occur. In any event, the potential remains for a break to the low 270's or so. Aggressive short-term traders could sell March corn in the low 280's with stops over 285 or 288. Longer term, traders could consider buying May or July calls on weakness for the long pull. Option traders should take advantage of any further decline to buy calls.

M. Steven Morgan

Consensus National Futures and Financial On Line Index

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