Will U.S. Producers Plant Too Much Or Too Little Corn This Year?
Today’s Spotlight Market
The strength in the U.S. Dollar could be the ?wildcard? for U.S. grain exports this season as a stronger ?greenback? makes U.S. Corn more expensive for non-dollar buyers. Given the current weakness in both the Brazilian Real and the Argentinian Peso, South America could see additional export business from traditional U.S. Corn buyers, especially as the Corn harvest in both Brazil and Argentina is underway and producers will be eager to sell this season?s crop given the falling value of the Real and Peso.???? ?
Fundamentals
With temperatures nearing 60 degrees here in Chicago, spring is finally in the air and with that, trader?s thoughts turn to the grain markets with the highly anticipated USDA Prospective Plantings report, viewed as the ?official? start to the spring planting season, due out at the end of March. Corn futures may receive particular interest this year, as the outlook for U.S. Corn plantings has varied among analysts.
While the general consensus is for about 87.5 million acres of Corn to be planted this season, a number of analysts are expecting a much higher acreage total, possibly as high as 92 million acres, if a number of producers in the upper Midwest switch to planting Corn from Soybeans this season. Assuming a conservative average trend yield of 160 bushels per acre, the difference between 87.5 and 92 million acres would be about 720 million bushels! That is a fair amount of Corn that may or may not be produced this season and could be the difference in determining whether U.S. Corn supplies will be more than ample or relatively tight this season.
Last week, the USDA lowered its estimate for 2014-15 U.S. Corn carryout by 50 million bushels as U.S. Corn exporters are expected to increase due to strong global demand. While higher Corn production out of South America could see U.S. Corn sales face some competition this year, dry conditions in South Africa is expected to reduce that nations Corn exports to levels not seen in over 8 year.
Technical Notes? -? View Today’s Chart
Looking at the daily chart for December Corn futures, we notice prices beginning to consolidate the past several weeks as the market has hovered between 400.00 and 425.00. We have seen the 20 and 200-day moving averages converge just above current price levels as it appears that market participants are awaiting a catalyst, such as the USDA Prospective Plantings report, to trigger the markets next major price move. The 14-day RSI has been holding near neutral readings but has recently started to weaken with a current reading of 39.80. Support is found at the January 30 low of 396.75, with resistance found at the December 29 high at 440.00.
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