Chicago Board of Trade Market News
Outlook: This week the price of the May corn contract fell back to levels that were not traded since October 20, 2014. At that time, the market was working slowly higher from the season lows that occurred at the end of September. Prices continued upward into the 2014 year-end as traders with short positions exited and other traders purchased to build long positions. Eventually, the average speculative position in corn transitioned from being short to being long. Many of those traders held on to their long positions in anticipation that a blatantly bullish catalyst would propel an explosive rally to the upside. However, that did not happen. Eventually, the established long positions needed to be reduced as the March and then May contracts transitioned toward their expirations. Such selling helped create some short-term bearish chart patterns. The result from present factors such as chart patterns and necessary money management is the price level for the current corn crop (in the initial stages of planting) is at the same level as occurred during the harvesting of the prior record crop.
Last week’s planting pace of 9 percent for U.S. corn was ahead of last year’s rate of 6 percent, but behind the five-year average of 13 percent. The quicker planting pace in the years prior to last season were not a great advantage. Obviously, there are other factors that influence final yields. For example, last season’s weather was favorable across most of the U.S. Corn Belt during pollination, and then remained that way to allow ears to fill without stress. Growing conditions in China and the Black Sea region were also favorable last season. There is a possibility that such a fortunate hand of conditions could again be dealt this year to the global feed grain market. However, a higher probability outlook seems to be that market participants will look back on the price action for the week ending April 24, 2015 and declare, “That was a good buying opportunity.”