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Mascoutah, Illinois | Tarafarms, I like corn and continue to like corn back to $4.20-$4.25 between now and the end of June.
Here is why:
1. From a technical standpoint, we have seen a smoothing mechanism from the $3.85 gap down to $3.47 back to the $3.70's. If you draw a line underneath the lows of the past 36 trading days, you get a semi-circle. (This is what is called a smoothing mechanism.) A sharp break to the downside, almost perfect technical retracement, and the trendline to the upside off of the $3.47 low has held.
2. Did you see notice the volume of the past trading days? It was anemic and I wondered if the CBOT was even open. We have traded in a 16 cent range in corn for the past eight or nine days. I couldn't find a recent chart with that narrow of a range over the course of that many days. I believe we are consolidating for a sharp move higher.
3. The rally in grains should have began this week but we have a problem that nobody has a definitive answer to. The rally if any will have to wait for more clarity from the USDA. We could easily see a 100 million or so bushel decline in corn which I believe is coming. Other things to ponder for traders:
A. Is test weight a debate?
B. How much of the unharvested acres are going to get harvested? What is the yield loss?
C. What is the next number going to be from the USDA? We almost always have a final yield number by January but this year is different due to the extreme weather events of 2009 and the unharvested acres.
D. What is the quality of the corn that is stored?
E. The last two USDA reports kicked every "long" square in the "cookies." The June report in 2009 caught almost everyone by suprise when 3 million corn acres appeared out of nowhere. Even Dennis Gartman who has traded commodities for 40 years thought the corn acre number was a missprint and had to make a phone call to get verification of the number. The report in January caught almost everyone on the wrong side again and the downside was a 20% haircut in corn prices. It appears nobody is willing to stick their neck out in front of this next report for fear of it being chopped off again. The trading volume on the CBOT reflects this the past seven or eight trading days.
If you take a look at the bean debacle on Thursday, volume was almost nil and the trade pushed prices down 20 plus cents. The "shorts" had every chance to push this market down 50 cents or so and they didn't on Thursday. I believe selling is exhausted in beans because nobody piled in when the "golden calf" was sitting right in front of them.
I still stand by my price targets of $4.20-$4.25 in corn and $11.08 in old crop beans.
Edited by djmcountryboy 3/5/2010 05:46
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Tarafarms and Thursday's market action
