Today’s Spotlight Market
Large speculators have finally thrown in the towel on the net-long position they have been holding for months and have now become overall net-short Corn according to the most recent Commitment of Traders report. During the reporting period ending August 9, non-commercial traders added over 40,000 new net-short positions in Corn futures, which took their overall position to a net-short 18,790 contracts. Small speculators, which were already net-short Corn for several weeks were covering some of this position reducing the net-short position by over 9,000 contracts. Commercial traders continue to by the dips in the market and added nearly 31,000 new net-long positions the past week.
Fundamentals
While U.S. Corn production is expected to be at record levels this season, our export competitors in South America are not so fortunate. The Brazilian government crop agent known as Conab reports that the second Corn crop will fall short of previous estimates, declining by nearly 500,000 metric tons to 42.59 million metric tons this season. This cut combined with a rather disappointing first crop is expected to cut Brazil?s overall Corn production to 68.48 million metric tons this season. For comparison, last year?s output totaled 84.67 million metric tons. The decline in production has caused Brazilian Corn prices to soar as local livestock producers scramble to obtain supplies. In fact, Brazil has been a buyer of Corn from both Argentina and Paraguay to help meet domestic demand.
Analysts believe that the U.S. will see increase Corn exports due to tight supplies in Brazil, which could help to place a floor on U.S. Corn prices despite a record harvest. Here in the U.S., additional Corn demand may come from the Ethanol industry which is experiencing record production totals. While the Corn demand picture is starting to turn bullish, producer hedge selling pressure may begin to emerge in the coming weeks especially if the record production estimate from the USDA appears to be accurate. This may help to curb any significant price rallies that may develop going into the 4th quarter of the year.
Technical Notes? -? View Today’s Chart
Looking at the daily chart for December Corn futures, we notice prices made a ?reversal? last Friday following the release of the USDA August Crop report. Since contract lows of 322.50 were made on Friday, prices have rallied nearly 20-cents on what appears to be short-covering buying. The market is now trading back above the 20-day moving average for first time since late June when the late-spring/ early summer price rally came to an end. The 14-day RSI has turned upward from oversold levels and is now reading a more neutral 41.69. The July 21 high at 348.50 is seen as the next near-term resistance level for the December futures, with near-term support found at this past Friday?s low of 322.50.
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