Will there be Clarity or “Cornfusion” after the January Crop Report is Released?
??? Fundamentals
Corn futures continue their price slump, falling to lows not seen since July of last year, as weak exports and lackluster demand have kept rallies in check. Even with Corn prices over $1.50 per bushel below the summer highs, exports remain slow, currently running well below the weekly average pace needed to reach USDA estimates for the current marketing year. In addition, ethanol production is running below the previous year’s totals, which is lessening the demand for Corn used in fuel production.
Many large speculators continue to liquidate net-long positions in Corn futures, with the most recent Commitment of Traders report showing large non-commercial traders shedding just over 4,500 contracts during the period ending December 31st. This long liquidation selling may continue as many traders square-up positions ahead of the January crop production and quarterly grain stocks report to be released on Friday.
The January crop report is usually widely anticipated by traders, as it is normally the final USDA total for the current crop year. Current estimates are for a final Corn crop of 10.626 billion bushels, down from 10.725 reported by the USDA in December’s report. U.S. Corn inventories as of December 1st are estimated to be near 8.2 billion bushels, though the average range of estimates is +/- 200 million bushels. Corn carry-out is expected to increase to 667 million bushels, vs. 647 million bushels in last month’s report.
?? Technical Notes
Looking at the daily chart for March Corn futures, we notice the market trying to form a near-term bottom, as prices test the widely watched 200-day moving average (MA). Monday’s lows were nearly a perfect 50% Fibonacci retracement of the major lows made in May 2012 to the August 2012 contract highs!
The 14-day RSI has just moved out of oversold territory, with a current reading of 37.70. Trading volume is starting to increase, with some traders positioning themselves for key Government data which has in the past led to limit price moves after the data is released. 675.00 is seen as the next support level for March Corn, with resistance found at the 20-day MA, currently near the 705.00 price level.
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