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Where's the corn market going?

Updated: 05/13/2011 @ 12:19pm

CHICAGO, Illinois (Agriculture.com)--The corn market 'slide' seems to be slicked up with butter, or is it crude oil? The sharp drop in the CME Group farm prices this week has many wondering where this corn market is going.

The short answer is down, temporarily, traders and analysts say.

It all started this week, following a Crop Progress Report that showed Iowa farmers planted 60% of their crop in one week. The market clung to that statistic and pulled back 4.0%. Another blow was delivered to the market when the USDA Wednesday announced that U.S. old-crop stocks were estimated at 730 million bushels vs. the trade expectation of 665 million. That figure helped sink the corn market to a 30-cent maximum daily limit close. 

Video: Corn market tanks on higher supply

Talk: Where does the corn market go now?

So, enough of history. Where is this corn market going?

Rich Feltes, RJ O'Brien market research specialist, says there is a general “risk off” mentality as fund managers lighten commodity longs.

On Thursday, reports surfaced that funds sold 20,000 corn futures contracts Wednesday, amid growing concern that commodity prices have topped out, leaving longs vulnerable to further large scale liquidation, he says.

 "The selloff is in wake of Pacific Rim countries tightening bank reserve requirements, as high as a record 21% in Portugual, dollar strength, signs of gasoline demand destruction and negative charts," Feltes wrote in a daily newsletter to customers.

Speaking of charts, at least one CME Group floor trader says the technical look of the corn market seems negative for the near future with a little light at the end of the tunnel.

"The market favors lower prices into the end of the week but would be called into question if we can’t hold the $6.88-$6.89 area," Tom White, FutureRoad.net corn trader on the CME Group floor, says. 

White adds, "We still have a technical gap on charts from $6.60 down to $6.53 3/4, as of Thursday morning. The market has firmed, and as of this writing, has tested up to last week's low of $6.80 1/2. If corn prices go above that $6.80 1/2 and hold, we could see $6.87. If we reach above that price, it would indicate a bullish market Friday."

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