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10-26-2018 09:29 AM - edited 10-26-2018 09:31 AM
The corn market is making life interesting today in what seems to be the start of a very critical period for corn prices. As alluded to in my message from yesterday, the market has bounced nicely off the $3.60 area back into the $3.65-$3.70 price region, a rise that is impressive for several reasons.
First, prices are rising in the face of bearish news. The latest export sale numbers for corn showed continuation of the reversal of trend that has been occurring the last few weeks. As I suggested in October when export sales were rising, I thought the increase would be short lived as foreign buyers front loaded the purchases they intended to make for the next few months, fearing escalation of the tariff issues that have impacted foreign buying of US agricultural products. As you recall at the time I said that once that front-loading of purchases ran its course, the export sales would fall back hard, and that is exactly what we are seeing now in the last few reports.
Secondly, corn prices are rising despite the stock market taking on the chin again today. At 10 am New York time, the Dow was down about 400 points, yet corn prices were up six cents from yesterday's close. Markets that rise against a backdrop of bearish economic news make a trader take notice, and that's what a lot of corn traders are doing today.
Third, the low traded yesterday was a quarter cent above the low made on October 11 just before the last crop yield report that ignited the price rally to the $3.785 recent high. So in essence the market since that high was set has retraced all of the prices through which the market shot up through on October 11. The important point to consider is that it did not go below that October 11 low, did not even touch it. That's a bullish sign for things to come.
So, what's next. As I wrote yesterday, the move to $3.65-$3.70, if it were to happen, would be a great second chance for anyone who has not started hedging production to get some cash in the cash register. And so I see today's bounce as a good opportunity to start selling some of your now-being-harvested production, as much as 20% of it. Sure the market can go higher from here - there's a 50-50 or better chance we now can move up to the $3.85-$3.95 area if the market trades up through $3.70. But at the same time, if the market fails to get up through $3.70, we easily could drop down hard through $3.60 and challenge the all important $3.54 support price. So since we don't know whether we get up through $3.70 or not, the prudent move now is to take advantage of this price bounce since yesterday to make some hedges or sales if you have not done either yet this season.
If the market rises through $3.70, I expect it to move to a higher high price than the $3.785 from where it failed on October 15. As I have written, the $3.85-$3.95 area seem to me to be the area that will be tested, and which will be an exquisitely early Christmas gift to producers to unload their inventories.
As such, keep your eyes on this $3.65-$3.70 area, because what happens from here will direct where the market trades for the next month to six weeks. While my own personal feeling is that the price will rise above $3.70, there isn't enough fundamental evidence apparent that would make me alter my trade plan. I am selling a bit more now in the present upper $3.60s, hoping the market will give me the chance to sell more above $3.85, and mindful that the present supply demand equation for corn along with the bearish over-riding trend combine to say that prices still have a much better chance to make a big move down as opposed to a big move up from where we are now.
Have a nice weekend.
10-26-2018 06:49 PM
Good information. Putting your specific price points helps to make charts make more sense.
I look more at the fundamentals. Yields here in the Platte River valley of Nebraska are wide. Some are best ever, a lot are second to 2016. Last year we had a lot of wind damage. Some are very disappointing. Stalk and stem rot. I usually look for a reason for the price to go up sometime...
Information shared from both the technical and fundamental sides are an advantage.