Chicago Board of Trade Market News
The December WASDE was released on Wednesday. While the data for U.S. corn ending stocks was slightly below expectations, traders initially were uncertain how to interpret it and prices temporarily weakened after publication. Such action is not uncommon when newly released data contains no major surprise and opposing camps of long and short traders enter into a momentary shoving match. Bearish traders were initially the strongest but they were unable to overcome the persistent resolve of bullish traders that steadily pressed prices higher by the end of the week. (Tangent point of interest: a bull shoves up with his horns and a bear strikes down with his paws – the reason for the names bulls and bears.)
A 10 million bushel increase in food, seed and industrial was the only change contained on balance sheet for U.S. corn within the December WASDE, but that was enough to cause the estimated ending stocks for U.S. corn in the current 2014/15 season to fall 2 billion bushels. This is an important psychological level because ending stocks really do need to be above it to make a case for extremely bearish price action. Market participants expected the estimate to remain above that level.
The present estimate of 1.998 billion bushels is still large, well above last year’s level of 1.236, but fundamental analysts recognize that there is a good probability for a further reduction in U.S. corn ending stocks in the January report. Such knowledge makes commercial traders more inclined to buy dips rather than sell rallies when corn futures contracts are priced below $4.00 per bushel. It really does not matter that speculators have already built up a sizable long position because they are unlikely to get forced out at current price levels if there is no one of size who is waiting to sell. Eventually selling will increase, but probably at higher than present prices.