Stagnant Demand, Weak Export Drop Grains

May 6, 2011

This information is provided by Archer Financial Services, Inc. 800-933-3996.

The owners of commodities took one on the chin the second half of the week as July corn slipped over 75 cents from its early week high before settling the week more than 70 cents below last week’s close. Demand for corn has stagnated and has slipped in some areas, as U.S. exports slipped to the lowest level on a weekly reporting basis since last October.

Meanwhile, the amount of corn used in the production of ethanol was reported as the second worst of the calendar year. The break this week was exacerbated by weakness in the crude oil market as well as precious metals. Add in the largest one day move higher in the U.S. dollar since last October, and you have the recipe for a liquidation break.

Make no mistake about it, there have been signs of rationing. This was not just a technical break. These lower prices should once again uncover some demand that will stabilize the market. Look for the grains to set up in a trading range until we get closer to the July 4 timeframe.