Corn Commentary
March closes 3 ¾ cents higher ($3.55 ¾), July 4 cents higher ($3.68 ¼) and Dec 3 ½ cents higher ($3.83 ½)
Jan Chgo Ethanol closes 4.1 cents a gallon lower (1.590), Feb 2.7 cents lower ($1.545)
Weekly Corn Export Inspections – 636.6 K T. vs. 800 K – 1.000 M T. expected
Speculative short covering took corn futures higher on the first trading day of 2017. I did not see anyone particular item that spurred this. The spec trade is net short and by now it should be common knowledge that index fund rebalancing will feature a fair amount of buying to get corn involvement back to the required percentage of the fund (Index fund rebalancing should start on Monday, the 9th). Some will try to say the weather in Argentine is a bit stressful as some areas report too much water while other areas report not enough. During the growing season where is it perfect every where? Weekly export inspections were feeble based on expectations. Export inspections should pick up as we move into the New Year. As we move forward into the New Year the trade will soon begin to focus on the USDA update on January 12th. Early thoughts are for a slight drawdown in the US carryout but at this writing I doubt it will be enough to sway the current sentiment of burdensome stocks.
Interior cash markets if not steady are firm. Ethanol processors continue to show the best basis structure despite the fact margins have been declining since the 2nd week of December. The gulf too is firm as we enter January. Despite the firm looking cash markets March corn loses fractionally to May and July while being steady to firm vs. the new crop. It will be interesting to see what kind of cash movement we saw on Tuesday given the price rally.
Despite the rally on Tuesday the corn market remains a trading range affair. The mid-$3.60’s to $3.70 remain as formidable resistance. In trading range affairs we are supposed to fade inter-day rallies not chase them.
Daily Support & Resistance for 01/04
March Corn: $3.52 – $3.61
July Corn: $3.64 1/2 – $3.73½
The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results.