Chicago Board of Trade Market News
U.S. Secretary of Agriculture Tom Vilsack announced that China’s yearlong ban on select varieties of corn has come to an end. This welcome news basically means that door for potential entry into China has been unlocked. However, the fact of having an unlocked door does not mean that it will be instantaneously flung open and vast quantities will flow though. Rather, it means that the door can be opened if and when the need arises, and that prospect alters market perceptions. As noted a couple weeks ago, it is perceptions that determines if corn approaching $4.00 per bushel is entirely too high and should be sold, or if it is still a buying opportunity.
Consider recent price action in the wheat market. There is presently no shortage of wheat anywhere in the world, but discussions that Russia would limit its wheat exports to favored cliental caused wheat contracts to suddenly increase in an exponential manner. With that example in mind, what trader will establish a large short position in corn contracts at present price levels prior to having more definitive knowledge of acreage and planting conditions in China and North America this spring?
Perceptions are being altered so that price setbacks during the next two months will be increasingly analyzed as potential buying opportunities rather than as confirmation of excessive supply. Ample supply should be available since U.S. producers are likely to sell into any further increase in corn prices after the New Year begins, but that selling will come in synchronized allotments rather than as all or nothing. The ebb and flow of supply and demand will carve out a trading range, which range is more likely to have somewhat of a positive slope during the next two months.