January 19, 2023
Corn futures have traded higher in response to the friendly January 12 USDA report, with nearby contracts gaining over thirty cents. The report was the new cornerstone and set a positive tone for price activity for the first half of 2023.
Ending stocks for the 2022/23 crop year remain tight, at 1.242 billion bushels, even with a reduction of corn demand for feed and exports. Looking ahead, old crop corn prices should remain firm, with basis levels likely also staying firm until the 2023/24 crop gets planted this spring, and summer weather outlook is known.
But with flakey outside market considerations and fear of further demand loss on the export front, how high can prices actually rally in the coming months? Here is your guide for navigating potential pricing opportunities for corn that you may still have in your bin. For the purpose of this article, I will be using the May 2023 corn futures contract to illustrate various scenarios.
Potential targets for higher price scenarios
The friendly January 12 USDA report put a solid floor in the market. The report allowed corn futures to create a bullish key reversal on the report day, usually viewed as a “bottoming signal” on charts.
The report was also friendly enough to allow corn futures to trade above short term resistance levels on charts. The end result is that May 2023 corn futures prices are now trading above that pennant flag formation, that had been corralling prices since summer.
Can this higher price trend continue, if so, what are the potential targets higher?
Price Target 1 = $7.00
Looking at the same May 2023 corn daily chart from a slightly different perspective (I removed the pennant flag lines), you can see the next potential target higher is the $7.00 area.
This could be achieved on any type of short term weather scare from South America. Now take note, should prices get to the $7.00 area, there will likely be cash grain moved, and prices could have a hard time trading higher than this price point. A greater amount of bullish news would be needed to justify a price breakout higher than the $7.00 resistance area on the May 2023 futures contract.
Price Target 2 = $7.33-1/4
There is a gap on this May 2023 corn futures chart at $7.33-1/4. This gap occurred after the three-day Juneteenth holiday weekend in June of 2022.
There is an old adage in this industry that “gaps on charts like to get filled.” Now, the question is what friendly fundamental news is needed to justify May 2023 corn futures price to be able to trade above that $7.00 price hurdle, and then proceed higher to $7.33-1/4?
The odds get slimmer, as the combination of friendly news needed would be bad weather in South America, (likely on that second crop corn in Brazil that gets planted in late March), and a suddenly strong surge in U.S. export sales.
Price Target 3 = $7.60 area
Now, let’s say that friendly news actually starts to show up in the coming weeks. From a technical perspective, one could argue that prices could retest the price highs for this May 2023 corn contract that it saw in summer of 2022. That price high area is in the $7.60 vicinity. The odds get quite slim for this to occur.
A LOT of friendly news would be needed, including:
bad South American weather for that second crop corn
strong U.S. export sales
higher priced crude oil, and
funds coming back into the market as buyers.
That is a lot of stars that need to align perfectly to achieve that higher price objective.
Keep these factors and potential price objectives in the coming weeks and months as you get ready to market your corn. My point is that it will take a dramatic amount of fresh, friendly market news to push corn futures prices substantially higher.
Set realistic targets
The January USDA report was supportive enough to keep corn prices from crashing lower, but not friendly enough to justify a dramatic price leap higher in the short term.
Keep in mind, while there is a friendly tone for the corn market for this upcoming year, it is NOT as friendly as it was last year at this time. The value of the U.S. dollar is higher than it was a year ago, the higher interest rates and fight against inflation is not a friendly factor, and the war in Ukraine is already priced into the market.
While the May 2023 charts currently look supportive for the short term, that doesn’t mean that prices have to rally higher. Please have a plan in place in case the market fundamentals start to shift to negative and prices start to shift lower. Store and ignore is not necessarily the best marketing plan in the months ahead.
Disclaimer: The data contained herein is believed to be drawn from reliable sources but cannot be guaranteed. Individuals acting on this information are responsible for their own actions. Commodity trading may not be suitable for all recipients of this report. Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition.Examples of seasonal price moves or extreme market conditions are not meant to imply that such moves or conditions are common occurrences or likely to occur. Futures prices have already factored in the seasonal aspects of supply and demand. No representation is being made that scenario planning, strategy or discipline will guarantee success or profits. Any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to Total Farm Marketing. Total Farm Marketing and TFM refer to Stewart-Peterson Group Inc., Stewart-Peterson Inc., and SP Risk Services LLC. Stewart-Peterson Group Inc. is registered with the Commodity Futures Trading Commission (CFTC) as an introducing broker and is a member of National Futures Association. SP Risk Services, LLC is an insurance agency and an equal opportunity provider. Stewart-Peterson Inc. is a publishing company. A customer may have relationships with all three companies. SP Risk Services LLC and Stewart-Peterson Inc. are wholly owned by Stewart-Peterson Group Inc. unless otherwise noted, services referenced are services of Stewart-Peterson Group Inc. Presented for solicitation.
The opinions of the author are not necessarily those of Farm Futures or Farm Progress.
About the Author(s)
senior market adviser, Total Farm Marketing by Stewart Peterson
Naomi specializes at helping farmers understand how to manage cash marketing needs and understand the importance of managing basis, delivery point considerations, cash flow needs and storage capacity. She earned her Bachelor of Arts in Political Science with a minor in Agriculture Business at the University of Wisconsin in Platteville. She has a Master of Science in Adult Education with an emphasis in Ag Economics from the UW-Platteville and a Master Certificate in Global Education, from the UW-Oshkosh.
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