Will Corn Outperform In 2016?
Today’s Spotlight Market
While there is some potential optimism for a rally in new-crop Corn prices as the North American growing season begins in the next few months, the outlook for old-crop Corn prices remains bearish, especially as the South American harvest picks up steam. Corn from Argentina and Brazil will provide stiff competition for U.S. exporters, especially if the U.S. Dollar remains strong when compared to the Real and Peso. Both large and small speculators are now holding net-short positions in Corn futures, with the most recent Commitment of Traders report showing the combined speculative net-short position totaling over 85,000 contracts as of February 9.
Fundamentals
With heightened volatility seen in the Equity, Oil and Gold markets to start the New Year, less volatile markets such as the Grain complex appear to have fallen off many traders? radar screens. Analysts are not forecasting any great market moves for the grains in 2016, although a few of the complex members have the potential to outperform current expectations. This morning we are going to take a look at the Corn market and what could be instore for prices in 2016. In 2015, Corn ?outperformed? both Soybean and Wheat prices, falling 9.6% for the year, while Soybean and Wheat prices were down by 14.5% and 20% respectively. U.S. Corn ending stocks for the 2015-16 season are currently estimated at a very comfortable level over 1.8 billion bushels. However, if we only see a modest increase in planted acreage and reach trend line yields, we could see ending stocks dip slightly this coming season. However, any experienced grain trader will realize that weather conditions throughout the growing season can alter this scenario by the time the crop is in the bin, and with some forecasts calling for a potential La Nina weather event later this year; it is far from certain what this season?s average yields will be. Even a moderate average yield decline of between 3 to 5 percent could see Corn ending stocks tighten considerably. With new-crop December Corn currently trading near 385.00, it appears that market participants are currently discounting any potential weather threat, or most likely have not yet turned their attention to the grain markets yet as Crude, Gold and Stock Indices have entranced the trading community.?? ?
Technical Notes – View Today’s Chart
Looking at the daily chart for new-crop December Corn futures, we notice that prices are still in the midst of a down trend when drawn from the July 2015 highs at just over 445.00. The market tested the major low made back in August of last year and traded briefly below this support level in January before staging a moderate price recovery. With prices still below both the 20- and 200-day moving averages, Corn bears appear to still be in charge, although the 14-day RSI has turned up from near-oversold levels and is now reading a more neutral 46.76. The January 2016 low of 374.50 remains support for the December contract, with near-term resistance seen at the February 4 high of 395.00.?
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