Farm Progress

Can anything move corn prices?

Kevin Van Trump

March 18, 2016

2 Min Read

Corn traders continue to see a market that has gone little to nowhere in 2016. In fact, here we are in mid-March at the same price levels as mid-January and in mid-February. In fact, for the entire year, the MAY16 contract has traded between $3.54^2 on the downside to $3.78^2 on the upside, in total, less than a 25¢ range.

The bulls are talking about a possible reversal on the charts as we have rallied throughout most of March. I don't see a major change, just more of the same sideways type action. Fundamentally, very little has changed. We still have a glut of cheap feed wheat floating around in the global marketplace and aggressively competing with corn. There's really no clear bullish demand story. U.S. exports, ethanol and feed usage seem to be little changed.

On the supply side, the USDA is now forecasting 90 million corn ares will be planted in the U.S. during 2016, and with early field work, some suspect even higher. The South American crop seems to have improved a bit in the past 30 days. Argentine weather feels a little better than previously forecast and the harvest is now rolling. Insiders are reporting more second-crop corn acres being planted in Brazil than had originally been estimated. China's talking more aggressively about dropping their corn reserve price, perhaps by as much as -30%, as they seem to be swimming in glut of old-crop supply.

Moral of the story, fundamentally nothing has really changed except for the fact we are now in the first inning of a U.S. weather market and the large macro funds have become a bit less bearish the overall commodity space on a weaker dollar and stronger crude oil prices.

As both a producer and a spec I believe there could be a bit more upside, especially if the macro bears continue being squeezed out of their short positions. An old-crop move to $3.90 and a new-crop move to $4.05 cannot be ruled out of the equation, especially if we see crude oil push towards $50 per barrel and the dollar falls under more heavy pressure. Keep in mind these are are big what ifs. 

As a producer, I remain patient waiting for higher prices before reducing more flat-price cash risk; my basis has been locked for an extended period. As a spec, I remain on the sideline, preferring to be a buyer on a deeper break to fresh new lows. I'm not a fan of buying a breakout in this environment; the outside macro markets simply feel too unpredictable.

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About the Author(s)

Kevin Van Trump

Founder, Farmdirection.com

Kevin is a leading expert in Agricultural marketing and analysis, he also produces an award-winning and world-recognized daily industry Ag wire called "The Van Trump Report." With over 20 years of experience trading professionally at the CME, CBOT and KCBOT, Kevin is able to 'connect-the-dots' and simplify the complex moving parts associated with today's markets in a thought provoking yet easy to read format. With thousands of daily readers in over 40 countries, Kevin has become a sought after source for market direction, timing and macro views associated with the agricultural world. Kevin is a top featured guest on many farm radio programs and business news channels here in the United States. He also speaks internationally to hedge fund managers and industry leading agricultural executives about current market conditions and 'black swan' forecasting. Kevin is currently the acting Chairman of Farm Direction, an international organization assembled to bring the finest and most current agricultural thoughts and strategies directly to the world's top producers. The markets have dramatically changed and Kevin is trying to redefine how those in the agricultural world can better manage their risk and better understand the adversity that lies ahead. 

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