As discussed in the lead, as the markets move into the month of December, technical signals are going to be very misleading. It is a time of the year that corn futures can give false breakouts both on the upside and on the downside. Be careful in this kind of market at this time of the year.
From a purely technical point of view, the trend in corn is up. Resistance in the March futures is just under $4.50 and support is at $4.20 – $4.30.
Farmer holding is very tight and as a result, basis levels are continuing to improve. Exports are continuing strong as expected, as shown below. That will also continue. Also as noted on ethanol and biofuels, ethanol demand remains impressive.
But with a carryover of slightly under two billion bushels, we have a lot of corn to eat through. Meanwhile, the early thinking, at this stage, is that corn plantings next spring are going to be strong. It’s still very early in the South American season, with most of the Brazil corn crop being planted after the soybean harvest, but so far conditions there are favorable.
Large speculators continue to buy corn at an impressive pace, shown below, but corn prices aren’t moving as much on that buying as we would like to see.
One wildcard right now is on the policy side, with plenty of uncertainty about what the new Trump administration will mean for trade and for biofuels support.
Cash-only Marketers’ Strategy: We’re sitting at 60% sold on the old-crop and nothing on the new. With prices continuing to grind higher, just be patient. For sellers, the basis trend is moving in your favor and so is the futures.
Hedgers’ Strategy: Sales are at 50% in the old-crop and we will let short December $5.00 corn calls expire at zero. We tried a short hedge on 15% and exited with a small loss. Just stand on the sidelines.
