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Technical objectives for new crop corn

Agriculture.com Staff 02/14/2016 @ 8:42am

Corn futures have had an interesting year with prices bottoming in September and then moving in a steady upward trend from September through mid-February.

Since February, futures have been in a decline with new crop December futures posting a high of $4.29-1/2 on February 22, and a recent low of $3.63-1/2 on April 2. Prices are currently trading between $3.85 and $3.90. Where does it go from here?

Bullish traders argue that the corn market is in a corrective mode and that prices will ultimately move higher and test the long-term high and resistance of $5.50 which occurred in 1996. Using the December contract, the recent setback from the high of $4.29-1/2 and low of $3.63-1/2 amounts to a correction of close to 40% from the low of September to the high in February. The downturn prices recently took filled gaps that were left in January when prices rallied. A pennant formation established in late January continues to suggest a breakout to the topside with December corn futures reaching $4.45.

Bearish traders consider the peak in February a top for a variety of reasons. First of all, the market failed to take this high out on a subsequent rally. Eventually, futures moved through critical moving averages, especially the 40 and 50-day, which held since the market bottomed in September. Now, the key is to see prices push back above these moving averages. So far, the market has failed to do so with prices last week challenging the 50-day moving average but failing to push above.

Downside projections are the $3.63 area and a further decline down to $3.40. From a timing standpoint, if planting progress goes well, it is likely that prices could meet these downside objectives.

Beyond these nearby higher and lower target points, weather will be the most dominant factor for price movement. With increased acreage, good weather and expectations for a 160+ bushel yield, prices could move well down to the lows that were established last September, just above $2.80. With big demand, that does not seem likely, but once a market gains momentum and if funds decide to go from long to short, the market may have a tendency to move further than people expect. Yet, on the other hand, the market will be very sensitive to weather issues and if there are problems, look for a test of $5.50. We wouldn't be shocked or surprised to see prices then move even higher with the long-term upside technical objective of $7.00 December.

If you have any questions or comments, please contact Top Farmer at 1-800-TOP-FARM, ext. 129.

Corn futures have had an interesting year with prices bottoming in September and then moving in a steady upward trend from September through mid-February.

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