May corn closed 53 cents lower on expanded limits Monday after closing lock-limit down on Thursday on a bearish stocks report. Soybeans and wheat also closed with double digit losses on follow through selling from last week.
The March 1st stocks report showed another 400 million bushels of corn more than the market was expecting and is the catalyst for the 93 cent drop in May corn in only two trading sessions! The open interest was up sharply after Thursday which could be from traders getting synthetically flat using the Sept and December futures, or it could be from heavy pricing. It will be important to watch open interest over the next couple of days because there is a massive fresh long position that is now underwater and hasn’t liquidated yet. I have included a weekly chart of the May corn contract. We haven’t been at current levels since June. Previously corn was finding support at its 50% retracement level but has now gapped below that level and looks poised to reach the 68.2% retracement at $6.25 ½.
May Corn (Weekly Chart)
May Corn (Daily Chart)
December corn is also making a series of lower highs and looks poised to reach its June low of $5.11, especially if the weather cooperates over the next couple of weeks and planters get rolling.
December Corn (Weekly Chart)
Acres were in line with expectations for corn at 97.28 million. Soybean acres were less than expected at 77.12 million and wheat acres were slightly higher than expected at 56.44 million. These numbers were a little bit lower than we would have guessed and think there is room for an increase before the July report. Take Illinois for example, their total corn and soybean acreage was down 250,000 acres from 2012, a little low by our estimates.
Today’s crop progress report showed wheat at 34% good-to-excellent, down from 58% this time last year. Corn planting reports are still a few weeks away from being reported.
For now we still like our current levels for hedge recommendations, please feel free to sign up to receive our letter full time using the signup link below, including hedge recommendations. Have a great week!
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They say wet weather in China's Northeast region reduced their overall corn “quality."
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