Corn
March corn closed the month of November gaining 7 cents from where October closed. Durning the month of November we saw the Dec/Mar spread go from a 15-cent carry at the biggening of the month to the high at 7.25 cent carry on the 26th. The spread acting this way indicates that the exporter isn’t buying enough corn at current prices to keep up with demand. This type of market reaction keeps the commercial grain elevators from storing grain and incentives them to ship available stocks to fill the void.
Grain marketing 101
-First follow basis
-Then follow spreads
-If the first 2 don’t get grain to flow then futures tend to rise to the point to get the corn stocks to market
Exports and Ethanol
Corn export sales for the week came in at 41.8 million bushels. This is the lowest in 9 weeks. This shouldn’t come at a surprise considering the U.S. Dollar was continuing its rally during the reporting period. (more on the dollar below). RJO estimates that to meet the USDA’s 2.325 billion bu export demand number, export sales need to average about 23.6 million bu per week from now until the end of the marketing year.
Ethanol production data released last week showed another all-time high. RJO reports that ethanol production the last 4 weeks has averaged 7.9% above last year’s same 4-week period, and 4.4% over last year since the start of the marketing year. YTD performances would suggest the current USDA projection of 5.450 billion bu for ethanol production may be too low.
This coming week we will get a Monthly Grains Crushing Report that will give us another source of data to use for Ethanol Usage.
Corn Charts
Friday’s trade was a bit of a do or die trade. Corn prices we coming in support at the 26 day moving average which is represented by the bottom line of the cloud chart. The first chart below has the cloud chart, there is a lot going on there but the nature of this indicator is supposed to be a “one look”.
- Is price above the cloud (trend is up) price below the cloud (trend is down)
- Is the leading edge of the cloud green or red
Corn found support on the bottom of the cloud and bounced nicely off of it. The second corn chart has some lines of significance.
Blue lines represent the threshold of the inside day. If we can cross the top line then this will help our case for higher corn prices. The next line is a prior high at 4.4225.
Technical and fundamentals are aligning for higher prices. Last week I believe we were caught up in December basis contracts needing the be price or rolled, and FCMs forcing long positions out. The movement of futures contracts can somewhat blur the view of what the actual market is.
Some of you may have sold a bit more than needed last week just to get the December basis contracts cleaned up since our original targets did not fill. We will be using the top of the inside day and 4.4225 as milestones to buy back a portion of those sales. I don’t want to be more than 30% sold at this point.
The next price target will now be off the March board at 4.54. to sell the next 15% of 2024 corn.
U.S. Dollar Index
Last Monday’s trade had the dollar gap open lower. This is unusual for the dollar index and keeps current wave counts intact for the anticipated drive lower past the July 14th, 2023, low.
The dollar tends to make large impactful moves around key economic data releases. Fridays PCE index didn’t give much for traders to trade from. This coming week the focus will be the JOLTS data release on Tuesday.
Current wave counts have 2 scenarios,
1. Now that the current rally has extended past the October 3rd, 2023, high, this completes a choppy correction that has lasted just a touch over a year, and we are in our impulsive wave lower past July 14th 2023 low.
2. We get a bullish scenario for the dollar this week with the JOLTS data, and we make one more push higher past the Nov 22nd high but keeping the bearish stance longer term into new lows past 99.578. In other words strength this week won’t change the forecast longer term.
Contact our Commodity Brokers for guidance on managing the challenges and opportunities arising from this week’s developments in the market.
Disclaimer
The risk of loss in trading futures and/or options is substantial. And each investor and/or trader must consider whether this is a suitable investment. Past performance is not indicative of future results. Trading advice is based on information taken from trades. Statistical services, and other sources that Paradigm Futures believes to be reliable. We do not guarantee that such information is accurate or complete, and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice given will result in profitable trades.
