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Plenty of reasons to be bearish on corn

Agriculture.com Staff 11/09/2009 @ 6:20am

Corn: Corn has not followed outside markets lately but Friday it just could not ignore the fact that crude was trading $2.50 lower on the grain opening. Right from the opening bell selling was seen in the corn that was reluctant to be found Thursday. With the help of crude being lower, good weather forecasts and some field drying there are plenty of reasons to be bearish this market.

Most of the support Thursday came from expectations that USDA will actually lower corn yield on Tuesday. We want to state that none of the producers we are talking with are giving us that idea at all. It would be no surprise to see yields unchanged. As of Friday corn was far from reaching support levels but selling Friday, especially late, brought December corn within 6 cents of that support. This week saw the end of fund buying early then fundamentals took over for the rest of the week. What we will need to watch out for this week is if corn does break support leaving itself open to the possibility of fund sell stops. This might wait to be accomplished until after the crop report on Tuesday but as soon as we put that report behind us if the weather still looks as good as forecasted selling could likely resume. After this week corn ended only a penny higher but took out many short positions in the mean time. We will remain fundamentally bearish and grateful that there was an opportunity to sell right off the truck with good basis and yields. Combines will switch from bean heads to corn heads this week and the true harvest pressure is expected.

Direction: Look for a test of chart support at 366-357. If this fails, then look for an eventual move towards 320. Combines will be moving in corn and hedge pressure is expected. This hedge pressure may come slow as drying rates will still determine the progress…Ryan Ettner

Hedge Action Alert: Allendale has officially started 2010 hedging. Orders are in for 25% coverage using December 2010 futures after today’s close. This will become active on tonight’s electronic trade. Currently, we are 35% covered on the 2009 crop using options. 65% of the crop is still un-hedged.

Trade Idea(s):

(11/05) Sell Dec at 383 or on a 357 stop close. Risk 404. Objective 320.

Option Strategy(s):

(10/29) Bought March 400 put/sell 420 call 17, risk to 8, objective 35. Closed 20. (11/05) Buy March 410 put and sell a 430 call for 14 cents.

***Disclaimer*** The commentary and trades below are derived from technical indicators provided in our Allendale Advanced Charts pages and may not correspond with the fundamental commentary above.

Corn Technical Commentary: No technical commentary due to illness Vital Technical Indicator: the next projected major turn day is November 11.

Rich Nelson Director of Research Allendale, Inc 4506 Prime Parkway McHenry, IL 60050 800-262-7538

Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading. For example, the ability to withstand losses or adhere to a particular trading program in spite of trading losses are material points which can adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results.

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