Chicago Board of Trade Market News
Outlook: The ongoing battle between “big supply” and “big demand” continued this week, with supply bears winning early in the week and demand bulls gaining ground toward the end. Following the WASDE report in which Brazilian and Argentinian exports were increased to 780 million bushels over last year, corn prices came under substantial selling pressure. The May corn contract approached the lowest prices of 2017 on Monday but brisk U.S. export sales and export inspections put a bid under the market starting Tuesday. USDA announced the sale of 4.7 million bushels of corn to Mexico on Tuesday and China purchased three cargoes (195,000 MT) of PNW corn. China still has considerable corn in stock and the purchase is indicative that not all those stocks are of usable quality.
The USDA’s weekly Export Sales report was bullish for corn this week as 58 million bushels in net sales were recorded, of which 49.4 were for the 2016/17 marketing year. This was well above the 18.7 million bushels needed to meet USDA’s export projections for the year. Moreover, it was above the 29.9 million bushels needed to meet USDA’s projections when seasonal trends are incorporated. Weakness in the U.S. dollar last week was helpful in promoting exports, as was the drop in CBOT prices.
From a technical perspective, May corn futures became oversold this week and subsequently found support at $3.60. In the short-term, the contract has some upward potential but longer term technicals are more bearish. Despite a 2 ½ cent gain today, May corn failed to close above its 100-day moving average at $3.67; a signal which may prompt traders to stack up additional sell orders at that point. Should bears succeed in holding back the current corrective movement in the market, a close below $3.60 would be needed to confirm the resumption of a minor downtrend. Following that, the next bearish downside target is $3.52. Should the contract close above the 100-day moving average, the next significant patch of resistance lies at $3.74-3.75. A test of this target would likely bring fund buying back from its recent hiatus.