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Senior Contributor

Corn Market Update October 22

Not a whole lot to talk about in Corn today, even though the market is at a critical price point. As I have written before, the high price recorded on October 15 at $3.785 fell within a selling zone that could wind up being a top before the overall bear trend re-asserts itself. And as I also have written in the past week or so, I am a bit skeptical that the reversion to trend has occurred, and only a strong trade through $3.60 and continuation down thereafter would make me think the top is in. So, the area we traded in this morning was quite critical to the near term course of the market.


Overnight the Front Month Corn Future traded down as low as $3.655, found a bid and has stayed above that level for the entire trading day. We even got as high as $3.705, and the short term momentum indicators have turned positive for now. This bounce up is especially interesting considering that the only important news of the day so far has been the Weekly Export Inspection data, which showed a second consecutive weekly drop after surging during the last two weeks of September and the first week of October. You will recall that while the inspections were surging I suggested that the increases were due to foreign buyers front loading the purchases they intended to make for the next several months, in advance of any tariffs that could raise the prices at the times they originally intended to buy. The 30% drop in inspections during the last two weeks seems to be validating that observation.


This afternoon after the close we will get the all important Harvest Progress Report, which will tell us how the harvest has resumed after the rainy period of several weeks ago. I have read a report this morning that said the harvest of corn and beans progressed at "breakneck" speed through the weekend in advance of expected rain during the middle of the coming week. Perhaps as important in today's Harvest report will be the crop quality estimation, as eventually that may be the deciding factor in total corn brought to market from this harvest. Obviously price going forward will be determined not simply by how much corn is collected, but by how much collected corn can be sold at market.


So with all this in mind, I have a feeling that the next 24 hours will determine what direction the corn prices move for the next month or longer. If the harvest is going badly, or if the crop is damaged more than expected, prices should continue the bounce started overnight and move higher to the mid-$3.80's with an outside chance of slightly over $4. But if the harvest report says the harvest is ahead of schedule and the crop is for the most part marketable, then the highs from October 15 are going to start to look like that will be it for the counter-trend rally.


My feeling on the market remains the same, you should have placed something like 40-50% of your expected production for this year at $3.60 - $3.80, saving the other half in case we go to the level indicated above. If the market breaks down below $3.60 and closes there for several days in a row, it will tell me that the best chances are done and gone and that the market will proceed down to at least the $3.29 level and perhaps lower. As such, if the market breaks and holds below $3.60, you should not be shy about pulling the trigger and getting your corn sold. Personally I am hoping for one more bounce up, as I would like the chance to take even greater advantage of whoever has been buying since mid-September. 


One other point...since most if not all of you use petrol products in the operations of your business, the oil market is at a very critical crossroads now, having made a significant correction from its highs of early October and being met with consistent buying in the $68-$69 a barrel area. There are a lot of factors at work here, and since this is a corn forum, I will not touch on them all. Bottom line is if the market holds here, there is a very good chance that the crude oil price rallies once again, this time up to the $90-$100 a barrel level. The recent scandal involving the heir apparent to the Saudi throne and the murder of an intelligence officer/journalist who was critical of the Saudi Kingdom could wind up having a strong effect on oil prices, and most of the factors involved indicate that the effect would be to push prices higher.  


So, if you can buy your gasoline or heating oil in advance, it may be a good idea to do that now. I would buy half of what I think I will need for this winter, and leave the other half open in case the price goes down further. Should prices tear to the upside, at least you will have what turns out to be a half supply of cheap energy for the coming winter. 

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