Market Perspectives April 17, 2014

Outlook: Corn contracts spent the first half of this week in a relatively flat trading range before drifting lower into the weekend. The planting pace of 3 percent complete is modestly below the five-year average of 6 percent complete at this time, but that fact is of no significant importance. U.S. farmers can plant 40 percent of the corn crop in a week if weather conditions are conducive.

The slight sell off in corn contracts this week could have been more pronounced without the influence of higher price action by wheat and soybeans. Wheat contracts rallied on concerns about unfavorable weather hurting the U.S. winter wheat crop and soybeans rallied because of an active U.S. crush rate. Corn contracts remained stationary during that same time period, even though last week’s data from USDA was more bullish for corn and the export pace for U.S. corn is favorable.

Speculators would like to drive soybeans to new heights but chart patterns for nearby soybean contracts look increasingly vulnerable to the formation of a bearish head and shoulders pattern. As well, wheat is a hearty plant and has time to improve under more favorable growing conditions. Eventually selling in those two contracts could have some downside influence on corn. Ironically, the extent of any sell off in corn within the next six weeks may be less than for either soybeans or wheat.

As noted last week, the near-term outlook is that corn contracts could experience a near-term price setback and then be followed by another rebound of some sort going into corn pollination. The condition holds that the size of any pre-pollination rebound in corn futures will be heavily influenced by weather.