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Unexplained Weakness in New Crop Corn

November 11, 2011

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

 

It was a negative week overall in the grain markets as corn closed .15-.40 lower, the soybeans slipped around .40 lower and the wheat market was off .20. 
 
The surprise of the week was the largely unexplained weakness to the new crop corn values.  December 12 Corn closed .38 ¾ lower for the week with little explanation. 
 
A potential rise in acres will likely be the culprit, but the timing of trading that factor does not fit.  December 11 Corn simply cannot move far from the $6.50 area.  It’s almost as if there is a rubber band around that contract with $6.50 being the center post. 
 
Values stretched to 5-week highs, but could not break out.  It then collapsed 30 cents and is prepared to test the November 1st lows early next week. 
 
The USDA Report on Wednesday held few surprises as corn production was cut, but most of that cut was offset by a decline in expected corn used for feed.  The soybean production estimate was fractionally lower, while soybean exports were cut 50 million bushels. 
 
The markets continued to be distracted by economic unrest in Europe as well as the collapse of the large commodity firm MF Global.  I would expect that the market will continue to chop around next week as fresh market news continues to be scarce. 
 
I continue to expect that the corn market will break out one way or another over the next couple of weeks.  My bias has been that the breakout would be to the upside, but given the strong competition of global supplies of corn and especially wheat which have strained our export markets, it may be time to look at some defensive hedge positions in corn if it cannot rebound early next week.
 
 

(click the charts below to enlarge)

 Market Movement Chart 11 11 11

 

Market Chart 11 11 11

 

COT 11 11 11

 


 

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