What the Technicals Are Signaling in Corn
Apr 19, 2012
Corn, as I am sure you are aware, has gotten dangerously close to breaking through most all major "technical" support levels as of late, and we need to perk up pay close attention. The "bears" will soon be banging their drum if the May contract can once again close below the March lows of $6.03. As you can see from the chart below many analyst view this as a critical support area that we needed to hold in order to avoid more serious "technical" based liquidation or net short origination. Overnight we posted a strong technical bounce, on positive news form the outside markets, more Chinese buying rumors and some new talk in the market about a severe Chinese drought starting to take hold in a couple of areas. As you can see from the chart, yesterday's low of $5.99^4 in the May corn contract is now near-term support and will be carefully monitored, while a trade below $584^4 (the one year low) could signal much more serious liquidation and certainly be cause for concern.
All of a sudden the question becomes, will the 30 day $0.75 cent price break in old crop corn be an interim "low" as we bounce back out of this hole or will it be the start of heavy fund liquidation? The July contract is facing a similar dilemma and will have its eye on the $5.90 mark as critical support, while the December contract is hoping that support at $5.20 will be able to hold.
Scott Irwin and Darrel Good, well respected sources from the University of Illinois Department of Agricultural and Consumer Economics issued a very good report that goes hand in hand with my recent arguments that the USDA could easily RAISE their current 164 bushel per acre national corn yield estimates in the May or June report. Remember back in 2010, after the record fast planting pace the USDA pushed the yield from just below 161 up to 163.5. I am telling you now I could see a very similar adjustment made this year. Here is the final conclusion from Good and Irwin, with a link to the entire report, it is well worth the read: "Corn planting in 2012 will reach the 50 percent completion date earlier than any other year since 1960 in Illinois and perhaps in Indiana as well. While Iowa is not likely to set a record early date, it is likely that Iowa will reach 50 percent complete well before its trend date. While some records will be set in 2012 it is important to keep in mind that other years have seen corn planting almost as early. The main market implication is that a smaller than average percentage of the U.S. corn crop is likely to be planted late (after May 20) and incur the yield penalty associated with late planting. As indicated in our post of March 23 a smaller than average portion of the crop planted late supports the expectation for the 2012 corn yield to be about two bushels above trend, if there are no other offsetting factors later in the season." 2012 Corn Crop To Be The Earliest Ever Planted?
The "macros" and "outside markets" are often just as influential to price direction in the grains as planting numbers and weather. I know as a producer, you may have questions as to how this pertains to your farm and your marketing. You can sign-up here to receive a FREE trial of my Daily Grain and Livestock commentary in which you will get where I stand on cash sales and some strategies on how you can take advantage of "Money-Flow." Just click here -