Chicago Board of Trade Market News
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Outlook: March corn futures have generally been under selling pressure this week as commercials took advantage of higher prices to sell and hedge inventory. The weather in South American remains a concern from a global production standpoint but the persistent high-pressure ridge that has created so much chaos in the region is weakening. Ethanol margins were weaker this week and, with a continued bias to the downside, will be creating reductions in corn demand. More significantly, the U.S. dollar’s four weeks of lower price action continued this week and did not substantially spur the corn market. Some traders and policy analysts are pointing to Mexican President Enrique Nieto’s cancellation of his meeting with President Trump. Concerns exist that Trump’s campaign promises to renegotiate NAFTA could damage U.S. exports to the country. Bearish sentiment was certainly uncovered this week but demand remains strong, 2017/18 production will likely be lower than last year, and South America has weather issues. There is still opportunity for an upward move in the corn market.
A fourth week of higher corn export sales was noted in this week’s report from USDA/FAS. Total sales (current and next marketing year) reached 54.8 million bushels and U.S. exporters sent 38.52 million bushels abroad last week. Last week’s activity brings YTD totals to 744.5 million bushels, up from 443 million this time last year. YTD bookings are up 69 percent but today’s report is largely considered neutral for corn. The weekly sales rate was above what was needed to reach USDA’s projections but actual shipments were below the 46 million bushels needed. Notably, the volume of unshipped (sold but not yet exported) corn is approaching 800 million bushels, well above the 450 million bushels that is typical for this time of year.
Friday’s CFTC data showed noncommercial traders are still net long and are adding to their position. Conversely, commercials are now net short after taking advantage of recent high prices to sell and hedge inventory. With this week’s more bearish tone, we are likely to see some reduction in fund length with tomorrow’s data. However, the corn market is still slowly grinding higher and some bullish factors are still in force. It is doubtful that funds will pare long positions significantly and higher prices are likely with fund’s current and expected position.
From a technical perspective, support has formed at $3.61 where strong demand appeared on Wednesday. The support allowed corn to shrug off Tuesday’s bearish outside day which was driven by a retreat from significant resistance at the 200-day moving average. For now, the 20-day moving average ($3.55) stands as support and a close below this point (which hasn’t happened since January 3rd) would likely usher in an additional wave of selling. Conversely, a close above $3.71 would be bullish and open $3.83 as the next price target for bulls.