AgriVisor Corn Commentary

Monday, March 07, 2016

***** Fundamental Analysis: More than anything, the corn market continues to be a follower, especially looking to wheat for some leadership.  Even though corn seems to follow soybeans more, it tends to mirror the soybean market when supply factors are involved; otherwise, it’s the demand interchangeability with wheat that plays a bigger role, especially when wheat is cheap and feed wheat readily available.  Having said that, this week’s export inspections, 37.5 mln. bu. were as good as expected, and higher than they were a week ago.  The trend indicates demand has shifted to the U.S. now that Brazil is winding down business.  The expanded shipping pace should help bolster prices, although with the carryout, it will take a threat to supply, or perception of one, to give the market much lift.  There will be some anxiousness about the plight of newly planted corn in the South with this week’s heavy rains, but that’s such a small part of the crop, that it won’t get much attention.  There’s some concern about this year’s yield though with the longer range forecasts still including a weather threat.  The speed of planting may lift or suppress production concern starting in April.  Traders expect some downward revision on exports to come Wednesday, but the USDA doesn’t tend to make big changes just ahead of a quarterly stocks report either.  And we are wary of the late season weather for Brazil’s second crop, diminishing production potential, allowing our export program to extend into early fall if their crop doesn’t live up to expectation.  They need good late summer rains to have large exportable supplies.  So far, planting has gone well, but the crop is still small.

***** Tech Comment: Corn futures are still “treading water” just above the contract lows posted at the beginning of the year.  It also looks like the decline off the early Feb high is complete too.  The March contract is still over the $3.50, and the $3.47-$3.50 support that has held every decline over the past year.  Still, there’s more work to do to indicate the trend is about to turn up.  The window for the 40-week low stays open through the month.  At the least, May needs to clear $3.62, a level it failed at Monday.  A close over $3.67 would be a better sign the minor trend might be turning up.  And at this point, it may take leadership from wheat, or possibly soybeans, to carry corn.  We tend to watch the wheat market the closest, as it has a similar short term cyclic structure.

***** Basis Trends:  Gulf +37 – dn 1, Eastern Corn Belt – dn 2/up 1, Western Corn Belt – dn 4/up 3.

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