Home Farm Equipment Why we may have needed that correction in the corn market

Why we may have needed that correction in the corn market


Volatility! What every week for the corn market! Whereas final week’s USDA report continued to ship long run pleasant information, the information launched was not pleasant sufficient to justify grain taking one other run larger in the quick time period. Subsequently, funds started to promote, triggering promote stops, which then triggered further technical promoting.

Huge bull markets have massive corrections alongside the method.

Trying again at years with triumphant value rallies, there have been loads of occasions alongside the method the place a swift value correction occurred to the draw back.

Two steps ahead, one step again is the mentality it takes to realize lofty value targets.

Particularly in this present rally for December 2021 corn futures, if you happen to have a look at the total value rally we have had since final August, there have been 4 main value runs up, with 4 important corrections alongside the method.  Every correction, of every separate segmented rally, achieved a 50% to 61% Fibonacci retracement correction.

The explanation I deliver this up now’s as a result of if you happen to take the early spring low for the December 2021 corn futures contract, (March 31 value low of $4.49-3/4) to the latest excessive (May 7 value excessive of $6.38), the latest value pull again over the previous week pushed costs all the way down to a low of $5.20-3/4, precisely a 61% Fibonacci retracement correction. This value was additionally particularly an extra value help space of the 50-day shifting common. Technically talking, this ought to be an amazing value help space for the December contract going ahead.

However what about these giant planted acres projected?

In response to the March 31 Potential Plantings Report, there shall be 91.9 million acres of corn planted in the United States this spring, and 87.6 million acres of soybeans planted. The following replace on these planted acres shall be on June 30th. At the moment commerce total anticipates each of these planted acreage numbers to extend. I agree. To know the way giant of a rise to realistically anticipate, I believed it prudent to take a historic perspective to achieve perception.

For the goal of this weblog, I appeared again at the previous 17 years. Why 17 years? 2004 was a yr that noticed the starting of elevated market volatility for agriculture. (Plus, 17 is my fortunate quantity. I hail from Cambridge, Wisconsin, and in case you are a NASCAR fan you perceive the significance of #17!)

The outcomes have been attention-grabbing:

For corn wanting again, 5 out of 17 years the USDA/NASS decreased planted corn acres from the March report back to the June report. 12 out of 17 years, acres have been elevated from the March report back to the June report. And on common, the improve for these 12 years was 1.125 million acres.

I emphasize this information as a result of there are many trade rumblings that corn acres for the June 30th report may improve from 91.1 million acres to 96-97 million acres. If true, it could be a large out-of-the-norm transfer for the USDA/NASS to make such an acres bounce, when in comparison with the previous 17 years.

Whereas previous efficiency is just not indicative of future outcomes, it makes me query if such a lofty improve in acres is achievable for the June report.

March vs June acres

Utilizing previous historic NASS information, the most USDA has elevated acres over the previous 17 years is 2 million acres. Placing that into context of the most up-to-date provide/demand tables, 93.3 million acres of corn planted, with present demand and USDA report yield printed on the May 12th report of 179.5 bu./acre would put ending shares close to 1.88 billion bushels. Nonetheless, utilizing that 2 million acre improve and suggesting that yield is something much less, say 172 bpa, places ending shares for the 2021-22 crop yr at 1.3 million bushels.

Regardless, the value volatility between now and mid-August will proceed to be nauseating. Proceed to forge forward with money gross sales, and be able to each defend unpriced bushels and probably re-own lately priced money gross sales ought to a climate occasion happen. 

Disclaimer: The information contained herein is believed to be drawn from dependable sources however can’t be assured. People appearing on this info are chargeable for their very own actions. Commodity buying and selling may not be appropriate for all recipients of this report. Futures and choices buying and selling contain important threat of loss and may not be appropriate for everybody. Subsequently, fastidiously think about whether or not such buying and selling is appropriate for you in gentle of your monetary situation. No illustration is being made that state of affairs planning, technique or self-discipline will assure success or income. Any choices you may make to purchase, promote or maintain a futures or choices place on such analysis are solely your personal and never in any method deemed to be endorsed by or attributed to Complete Farm Advertising. Complete Farm Advertising and TFM check with Stewart-Peterson Group Inc., Stewart-Peterson Inc., and SP Danger Companies LLC. Stewart-Peterson Group Inc. is registered with the Commodity Futures Buying and selling Fee (CFTC) as an introducing dealer and is a member of Nationwide Futures Affiliation. SP Danger Companies, LLC is an insurance coverage company and an equal alternative supplier. Stewart-Peterson Inc. is a publishing firm. A buyer may have relationships with all three corporations. SP Danger Companies LLC and Stewart-Peterson Inc. are wholly owned by Stewart-Peterson Group Inc. until in any other case famous, companies referenced are companies of Stewart-Peterson Group Inc. Introduced for solicitation.

The opinions of the writer are usually not essentially these of Farm Futures or Farm Progress.


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