Although fundamental or technical features can provide a guide to possible price strength or weakness, the management of these changes is most important to a successful marketing plan.
Expansion of Demand Base Will Be Key
The USDA Acreage report confirmed our estimate of a huge increase in bean acres and a 5% reduction in corn acres. Depending on yields, a corn carryout of 1.7 billion to 2 billion bushels could be a reality.
To stop the downtrend in prices, yield prospects must be curtailed by lower crop ratings, or demand must increase another 300 million to 600 million bushels. That could happen if cattle and hog herds expand or with more exports. Lower prices should also curtail corn acreage expansion in South America and Ukraine over time.
Technically, we will monitor daily and weekly indicators for a sign that sellers have lost their appetite to drive prices any lower, as occurred in early December 2013 before prices rallied 80¢.
For 2014, initial USDA reports forecasted a devastating 1.8 billion bushel carryout and drove prices to three-year lows. It only took seven months for usage to reduce carryout to 1.15 billion bushels. Hopefully, demand expansion continues into the 2014/15 crop year. If not, some inefficient producers could be in for tough times.
Disclaimer: There is substantial risk of loss in trading futures or options, and each investor and trader must consider whether this is a suitable investment. There is no guarantee that the advice we give will result in profitable trades.