What is the Best Chance fora Corn Rally?
Sep 21, 2017
TRADING COMMODITY FUTURES AND OPTIONS INVOLVES SUBSTANTIAL RISK OF LOSS ANDMAY NOT BE SUITABLE FOR ALL INVESTORS. YOU SHOULD CAREFULLY CONSIDER WHETHER TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR CIRCUMSTANCES, KNOWLEDGE AND FINANCIAL RESOURCES.
So far December corn has been able to hold the August 31st lows. However to this point the bounce off the lows has not been impressive. With early harvest results suggesting that the crop is near the USDA’s national average yield estimate of 170 bushels per acre corn has had a hard time finding any upward mobility. So what could help corn find higher prices?
December corn posted a key reversal on August 31st and so far this has held as the seasonal low. Traditionally harvest lows would come in October or November but they have been coming early in the last few years. Part of the reason for this could be that producers have held on to massive stocks of old crop corn looking for higher prices only to have to sell off those stocks at the last minute to make room for the incoming harvest.
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This year it might be difficult to make a bullish argument for corn. Yields seem to be better than expected as bouts of hot and dry conditions did not have as big of an effect on the overall crop as was originally thought. There are massive old crop stocks available too and the market seems to be flooded with corn for now. Short of a new source of demand for corn it might be difficult to imagine the fundamental picture changing in the near future.
This could mean that if corn is going to find some strength it might have to come from somewhere else. With the large speculators building a large short position its possible that something outside the corn market could trigger short covering. A rally in soybeans or wheat could (but not necessarily) provide that spark. Wheat might not have much of a story anytime soon either, but the soybean market could. With strong demand in recent weeks there could be a story if soybean yields were to come in below the USDA expectations. If this were to happen it could be the spark needed to get corn to find some strength.
We have complimentary 2017 commodity reference calendars available. They are a little bigger than pocket sized and very useful if you follow…