Home / Markets / Markets Analysis / The tide is turning

The tide is turning

Agriculture.com Staff 09/21/2007 @ 12:56pm

Over the last two months, corn prices have moved in a sideways pattern. However, better-than-expected yield during the early part of harvest have failed to pressure prices.

In fact, just the opposite. Corn futures traded as much as eight cents lower on Tuesday but managed to finish steady by day's end. Then on Wednesday, corn traded four cents lower early in the session but finished a nickel higher.

On Thursday morning, news that China may import grain, stronger than anticipated export sales, and technical buying boosted corn prices 10 cents. After a $1.06 price slide from mid-June to mid-July, the market is now viewing price setbacks as buy opportunities, despite harvest.

The technical picture indicates December corn futures bottomed at $3.24 1/2 on July 23. A rally ensued to $3.60 only to see prices quickly fall back to $3.26-1/2. However, on August 16 -- the date $3.26 1/2 was established -- futures finished at $3.39, a significant rally of 13 cents from the daily low. Prices then rallied to run out of gas at $3.72 on August 23, setting back to $3.35 1/2 before this week's rally at $3.75.

The point is to illustrate a technical picture in which a series of higher highs and higher lows have occurred and, by definition, are in an uptrend. Most impressive is the market finding plenty of buying interest and limited additional selling when prices drop.

So what does it all mean? There is a growing belief that, despite this year's record production, long-term demand will continue to keep prices supported. Buying interest is surfacing. Not only is ethanol an important piece of the bullish puzzle, but world inventories are at three decade-low levels.

In addition, the world has little substitutable feed wheat and, therefore, as demand grows and supplies diminish, market volatility increases. The input structure for corn has become much more costly in recent months. Higher wheat and bean prices suggest there is a high likelihood that corn futures will need to rally in order to secure acreage. The tide is turning bullish.

If you have any questions or comments, please contact Bryan Doherty at Top Farmer at 800/TOP-FARM.

Over the last two months, corn prices have moved in a sideways pattern. However, better-than-expected yield during the early part of harvest have failed to pressure prices.

CancelPost Comment
MORE FROM AGRICULTURE.COM STAFF more +

Farm and ranch risk management resources By: 07/07/2010 @ 9:10am Government resources USDA Risk Management Agency Download free insurance program and…

Major types of crop insurance policies By: 07/07/2010 @ 9:10am Crop insurance for major field crops comes in two types: yield-based coverage that pays an…

Marketing 101 - Are options the right tool… By: 07/07/2010 @ 9:10am "If you are looking for a low risk way to protect yourself against prices moving either higher or…

MEDIA CENTERmore +
This container should display a .swf file. If not, you may need to upgrade your Flash player.
The Future of Livestock Production
Agriculture.com

FREE MEMBERSHIP!

CLOSE [X]