AgriVisor Corn Advice

Tuesday, April 26, 2016
Fundamental Analysis: More of the same for corn on Tuesday, with speculators stepping into the market to cover their bearish short bets.  Weather worries are sparking some short-term concern for the bears.  U.S. forecasts lean price positive.  Potentially-severe storms are developing in the Southern Plains and will move into the Midwest by mid-week.  Friendly U.S. weather stories are partly offset by the rapid corn planting progress already achieved.  USDA called the crop 30 percent planted as of Sunday.  South American weather is still price positive, with corn in Brazil threatened by drought and soybeans in Argentina damaged from flooding.  That storyline is somewhat offset by more favorable two-week forecasts for the two countries.  For now, a large-scale buying campaign from the speculative crowd is offsetting lingering negativity surrounding large old-crop inventories and large acres intended for the new-crop.  

Tech Comment: Even with a wide trading range, corn futures still had an ‘inside day’ on the charts.  Just ahead is resistance from the 200-day moving average, currently drifting lower from $3.88 3/4 for the July contract.  $4.00 will remain as key psychological resistance with the April 21 high of $4.07 1/4 the next potential upside stopper.  The bears still look for a deeper correction after the April rally.  While it’s possible July could drop back to where this rally started from, $3.51, it needs to close under $3.70 to indicate that might be possible.  And it wouldn’t necessarily be uncharacteristic for a market to drop back to where it started from after potentially putting in a major low, we still don’t see it as a strong possibility.  As it is, there aren’t any timing lows due until Sept. 1.  In the short term, any rebound to $3.89 will likely stall.  

Basis Trends: Gulf +44 – stdy, Eastern Corn Belt – dn 6/up 1, Western Corn Belt – dn 6/up 3.

Basic Recommendation: **** Use any rebound to get old-crop sales up to 40% complete.  If you have any corn on a basis contract that needs to be priced by late June or July 1, get those bushels priced too, at least a part of them. While we are not as concerned as we are for soybeans, the market could get a little sloppy for a while. We do expect slippage into a minor low in mid-May.  The next pricing opportunity may not come until late summer, although there should be an early summer opportunity too. We are still reluctant to make new-crop sales with prices having just recently turned up out of a major(40-week) low, but like old-crop there could be a serious correction into middle May. While we wouldn’t say no to sales with Dec. futures at $4.00, we still think there will be opportunities to price new crop with Dec. at $4.20-$4.50. *****