More Fodder For A Low In Corn

October 6, 2011 01:05 AM

What Traders are Talking About:

* Short-term low for corn? There have been some attempts at picking a bottom in the corn market recently, but yesterday was the first time on the sharp price slide corn futures have posted strong gains and finished near session highs. That's the first compelling clue that corn has found a short-term low, especially when you also consider Dec. corn futures spiked the July low at $5.75 1/2 on Monday, but failed to find any fresh selling below that key chart level. Dec. corn futures are now working on a "V" bottom on the daily chart, but still haven't retraced 25% ($6.24 1/4) of the price plunge from the contract high to Monday's low.

The long and short of it: Bullish sentiment is seemingly rebuilding in the corn market, but support from the demand side and macro-economics is needed to turn this into more than a correction to the sharp price plunge.

* Informa estimate sparks bullish reaction in corn. Informa Economics cut its corn crop estimate to 12.519 billion bu.(149.5 bu. per acre yield) from 12.711 billion bu. (151 bu. yield) in September. While the estimate is still above USDA's September estimate of 12.497 billion bu.(148.1 bu. yield), the cut was a bullish surprise for traders. Informa raised its soybean crop estimate to 3.087 billion bu.(41.8 bu. yield) from 3.061 billion bu.(41.5 bu. yield) last month. The Informa forecast is virtually the same as USDA's September estimate of 3.085 billion bu.and yield of 41.8 bu. per acre.

The long and short of it: Corn traders have been looking for a bullish spark and the unexpected drop in the Informa crop estimate helped fuel active buying yesterday.

* European bank recapitalization appears likely. Jose Manuel Barroso, president of the European Commission, said, "We are now proposing member states to have a coordinated action to recapitalize banks so to get rid of toxic assets they may have." The European Central Bank (ECB) is also likely to address liquidity concerns by announcing it will resume longer-term lending to banks. The ECP is expected to leave interest rates unchanged, but set the tone for a potential rate cut down the road.

The long and short of it: Investors' confidence in macro-economics is improving, which is bullish for risky investments like commodities and stocks. But there's still a lot of hurdles to clear.



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