Bears In Charge As Corn Prices Plunge
Today’s Spotlight Market
Even though Corn prices are trending lower, large speculators continue to hold a rather large net-long position according to the most recent Commitment of Traders report. As of May 27th, non-commercial traders were holding a net-long position of over 253,000 contracts. While this was down nearly 27,000 contracts for the week, it was still over 140,000 contracts above the net-long position this time last year. Continued long-liquidation selling may occur unless we start to see some sort of weather scare that could trigger a ?risk premium? to be factored into prices in the coming weeks.
Fundamentals
U.S. Corn producers have taken advantage of ideal weather conditions, as nearly the entire Corn crop has been planted. The USDA in its weekly crop progress report noted that 95% of the U.S. Corn crop has been planted as of this past Sunday, vs. 88% last week. Plantings in the important Corn producing states of Iowa and Illinois are nearly complete at 99% and 98% respectively.? In addition, the condition of the newly emerging Corn crop is stellar, with 76% rated good to excellent. Recent weather forecasts are calling for a large part of the Midwest to experience above normal rainfall, with average to slightly above average temperatures, which should help to keep the Corn crop in top condition.
Already some analysts are beginning to raise their estimates for the size of the U.S. Corn harvest, although it is really too early in the season to declare the crop ?made?. New-crop December Corn futures prices have tumbled the past few weeks and are now trading at 4-month lows. Solid export demand has helped to support old-crop/new-crop spreads, with the July/December Corn spread trading at a 4-cent July premium, vs. a 12-cent December premium earlier this year. However, even old-crop Corn prices have been trending lower, despite decent exports. Traders will get the latest crop outlook from the government next Wednesday, when the USDA releases its forecast in the June Crop Production and Supply/Demand report.
Technical Notes? -? View Today’s Chart
Looking at the daily chart for December Corn, we notice the uptrend drawn from the January lows was broken in mid-May, which triggered a nearly 50-cent per bushel sell-off as weak longs exited the market. Prices are now trading below both the 20- and 200-day moving averages (MA), and the 20-day MA appears poised to cross below the longer-term 200-day MA, which is generally viewed as a bearish indicator by technicians. The 14-day RSI has entered into oversold territory, with a current reading of 27.67. 450.00 is seen as the next support level for December Corn, with resistance seen at the 200-day MA currently near the 478.00 price level.?
———————————————————————————————-
Disclaimers
This article is provided for informational purposes only. No statement in this article should be construed as a recommendation to buy or sell a security or to provide investment advice. The content provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy and completeness. optionsXpress makes every effort to provide timely information to its recipients but cannot guarantee specific delivery times due to factors beyond our control.
Derivatives involve substantial risk and are not appropriate for all investors. Please read the?“Disclosure Statement for Futures and Options”?prior to investing in futures or options.
For investments using a straddle or strangle options strategy the potential loss is unlimited. Multi-leg option strategies are subject to multiple commissions. Profits may be eroded by the commission expended to open and close the positions and?other risks?apply.