Fundamental & Technical Factors Could Push Corn Higher
by Tim Evans
Traders have been concerned recently over the conditions of the corn crop based on recent reports.
Every Monday the USDA releases a crop progress report to show the progress farmers are making in getting the crop in the ground. The report also shows the emergence of the crop as the season comes along, specifically, the percentage of the crop that has already emerged from the ground.
As of June 1, 95 percent of the corn crop has been planted. Last year, at the same time, it was 99 percent. Plantings are obviously behind. Part of this can be attributed to this year’s long winter.
At this point, I think the emergence number is even more important. The five-year average emergence during this time in the growing cycle is 89 percent. Currently, only 74 percent of the crop has emerged, compared with 92 percent last year. We are definitely behind in crop emergence. Forecasts of wet conditions are causing worries of continued late emergence of the corn crop.
The quality report was also worse than last year. Only 63 percent of the crop was rated as good to excellent condition, compared with 78 percent last year.
From a fundamental perspective, demand is still strong. And since we have a reduced supply, simple supply and demand principles should have corn trading at higher prices.
On the technical side, if you look at the chart below of July corn futures, the market has held the 50-day moving average all the way up. The 50-day average is coming in at about $6.01 a bushel. I’m looking for corn to hold that level and continue to trade higher.
There isn’t a lot of room for problems based on the sluggish start corn has had. If the weather trends that we’ve seen for the first five to six weeks continue, that should put a damper on supply and keep corn trading higher.
How you position yourself depends on the amount of risk you’re willing to accept to get access to the market. It also depends on the working capital you have. Generally, I have a long-side bias in the corn market and I think $7 is a reasonable target.
Call me for more specifics on trading strategies to suit your particular risk tolerance, and, ask about a special promotion to get 50 percent off commissions for your first 30 days with a new account.
Tim Evans is a Senior Market Strategist with Lind Plus. He can be reached at 800-798-7671 or via email at tevans@lind-waldock.com.
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