Content ID

141295

Corn Bounce Doesn’t Suggest Long-Term Rally

A strong day was posted in corn today on solid volume. There were a few reasons used to explain the reason for the bounce but most of them didn’t seem to make much sense. Early in the morning there was talk that the rally was based on weather forecasts remaining wet. After the noon maps came out much drier and corn did not set back, the talk suddenly shifted to rains that had already happened. For the most part, it appeared to be trade scrambling for reasons to explain the bounce all day with no one coming up with a very solid reason. It could have been light fund short covering as there were enough volume spikes to support that explanation.

While the bounce was a welcome sight for the bulls, it didn’t make it quite high enough to suggest any longer term rally just yet. This is obviously not the time of year that bulls should expect a sizable rally unless yield disappoints in a big way or if funds use fall as a time to short cover their positions in corn. Short-term, we should still expect normal harvest pressure; it is a little early to start assuming highly disappointing yields just yet.

Bulls

  • If today’s bounce was based on weather, bulls can look for a slight further bounce if forecasts suggest continued rain.
  • Chart resistance is not found until $3.43¼ per bushel allowing for a little more technical bounce before expecting sellers to actively step in.
  • Fund short covering could offer the best short-term support during harvest if that was what caused today’s bounce.

Bears

  • Early harvest reports have been as expected so far suggesting very strong corn yields to start harvest.
  • If no additional 8 a.m. sales are seen, bears can assume that active exports will not be seen again unless price moves lower.
  • Noon forecast maps took out a good amount of rain suggesting that harvest moving forward can resume at a good pace. Bears will want to see maps like this on Monday.

Rich Nelson
Allendale Inc.
815-578-6161

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