Bears Retreat As USDA Lowers Corn Inventories Forecast

Today’s Spotlight Market
Multi-year lows for Corn prices have triggered increased buying interest according to the USDA.? In the February Supply/Demand report released on Monday, the USDA lowered its estimate for 2013-14 Corn stockpiles to 1.481 billion bushels, vs. the January estimate at 1.631 billion bushels. The forecast was well below the average analyst estimate of 1.6 billion bushels, as the USDA raised its estimate for U.S. Corn exports. Global Corn stockpile estimates were also lowered to 157.3 million metric tons (mmt). The USDA kept steady its estimate for Brazilian Corn production at 70mmt, but lowered its forecast for the Argentinean harvest by 1mmt to 24mmt this season. ?


Corn bears are starting to get a bit nervous, as talk of sub-$4 Corn futures prices have, so far, failed to materialize, as Corn prices have moved higher to start the year. A short-covering rally may be gaining some momentum after the USDA lowered its forecast for U.S. Corn inventories this season. Larger than expected U.S. Corn export sales were behind the lower inventory estimate, as the USDA upped its export forecast to 1.6 billion bushels, which is up 150 million bushels from the January estimate.

The increase in Corn exports comes despite projections of record Chinese Corn inventories this season! Even though it appears that Chinese Corn imports may fall, willing buyers from other Asian nations such as Japan and South Korea should more than make up for any decrease in Chinese purchases. The U.S. will need to see strong export totals,, as Corn carryout totals will still be large despite the lower estimate. As a comparison, U.S. Corn carryout for 2012-13 was 821 million bushels, vs. nearly 1.5 billion bushels for this season.

The next wildcard for Corn prices will be the amount of planted acres dedicated to Corn this spring. The recent price rally for new-crop December Corn futures may encourage more producers to consider Corn on swing acreage this season. This belief is leading many analysts to raise their Corn acreage estimates to between 94 and 95 million acres. We will get the first ?official? government estimate on March 31st when the highly anticipated prospective plantings report is released.


Technical Notes? -? View Today’s Chart
Looking at the daily chart for March Corn, we note what may be shaping-up as a ?rounded bottom? formation cumulating in the downward price spike and subsequent upside reversal made back on January 10th. Prices appear to be running into some chart resistance near the 450.00 level, which is a price level not seen in the March futures since late November.


The 14-day RSI is approaching overbought levels, with a current reading of 65.99. The most recent Commitment of Traders report shows that non-commercial traders have started to become net-long Corn futures by adding over 56,000 new net-long positions during the week ending February 4th. Commercial traders were selling contracts to the large specs, as the commercial net-long position decreased by over 55,600 contracts. Non-reportable traders continued to hold a rather large net-short position at 142,936 contracts. Support is seen at the recent low at 406.25, with resistance found at 450.00.



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