So who will prove right on corn prices?
Will it be the “pundits” who, according to Benson Quinn Commodities, “feel we could break corn prices $0.25-0.30 a bushel”.
Given large supplies of the grain, the idea of lower prices still hardly looks out of the question.
‘Turning markets rarely scream buy me’
But is this just a case of it being darkest before dawn for corn price bulls, and that a bounce in values is just around the corner?
Data from SentimentTrader suggest that things are so bleak for corn prices, that they are in fact upbeat.
The grain was the most hated commodity last week, with an optimism index (optix) index reading of 21 as of Thursday.
“Looking at their historical data, there have been 143 days since 1990 when the Optix was below 22,” Tregg Cronin at Halo Commodity Company said.
“Six months later, corn showed a positive return 90% of the time which averaged 10.6%.
“Given the poor fundamentals, bearish technicals and low volatility, the aforementioned might be difficult to believe, but turning markets rarely scream buy or sell me.”
‘The only thing supportive…’
In fact, not all corn’s technical factors are so negative, with data overnight showing a further small build, of 2,861 contracts to 205,624 contracts, just a smidgen below an 18-month high, and with substantial short holdings raising fears that the position is overcrowded and vulnerable to a reversal.
The “only thing supportive [for prices] appears the managed money position”, said Benson Quinn Commodities.
At Global Commodity Analytics, Mike Zuzolo said: “I simply don’t think that many more new shorts will want to enter this market given all the other key technical indicators.”
Indeed, Terry Reilly at Futures International flagged another technical reason for optimism, from a chart signal.
In the last session, “March corn’s inability to test its recent contract low established on Thursday tells us short-term lows might be in”.
Nonetheless, the March contract was trying its damnedest again to get to a fresh contract low, dropping 0.1% to $3.54 ½ a bushel as of 09:30 UK time (03:30 Chicago time) only 0.5 cents above the current low.
The December lot was 0.2% lower at $3.41 ½ a bushel.
‘Climatic conditions globally favourable’
Nor did rival grain wheat fare much better, shedding 0.1% to $4.24 a bushel for December.
Hedge fund position data showed an increase in their net long up 14,000 lots to above 125,000 contracts as of last Tuesday, a substantial holding, and the largest indeed since the record of 162,327 contracts set in April.
However, “climatic conditions remain globally favourable just before winter in north hemisphere”, a key period for winter wheat crops, said Agritel.
Along with rains in Brazil, a factor more for soybeans, “these two elements are weighing on the market as they suggest a promising crop for 2018”.
Softness in the US export performance is also worrying investors, with Tobin Gorey at Commonwealth Bank of Australia saying that US shipments “look to be slowing”.
Based on US Department of Agriculture data on Monday, “our estimates suggest US wheat exports are about 1m tonnes behind where they should be if they are to make the USDA’s forecasts” for the full 2017-18.
“Russian replacement is trading well below current” US export offers, said Benson Quinn Commodities.
‘Sharp drop in prices’
In fact, soybeans fared best of Chicago’s big three, if only by adding 0.1% to $9.75 ¼ a bushel for March delivery.
Sure, Brazilian rains have improved prospects for soybean crops including in top growing state Mato Grosso.
A “sharp drop in prices” in the last session “may indeed mean that the market’s worries about soybeans in Mato Grosso have been washed away”, Mr Gorey said.
However, dry weather has already taken a toll, with Safras reporting that 56.2% of the Brazil soybean crop had been planted as of Friday, up from 41.7% a week earlier, but down from 65.4% year earlier.
‘Demand tails off’
Elsewhere in the oilseeds complex, palm oil was not so lucky, dropping 1.2% to 2,729 ringgit a tonne, following on from a drop in prices of rival soyoil in Chicago overnight.
Oriental Pacific Futures flagged talk of a soyoil market “which is looking at oversupplies”, besides restating the negative sentiment from data last week showing a soft start to November for Malaysian exports, and bigger-than-expected production last month.
“Demand for the tropical oil tails off towards the year end.”
‘Plenty of cotton in the pipeline’
Meanwhile, in New York, cotton for December added 0.7% to 69.37 cents a pound, defying for now downbeat talk from Ecom.
“Currently 64% of the US crop has been picked and a lot of the cotton is expect to be of favourable quality,” the trading house said, adding that “there seems to be plenty of cotton in the pipeline for prompt shipments.
This has seen US basis drop slightly as supply starts to overtake the prompt demand.”
Such a market “oversupply will most likely translate to the cotton futures and we will see December down -100 points by the end of the week I suspect”.
But not yet.
(Source – https://www.agrimoney.com/news/morning-markets-is-the-corn-price-outlook-so-bleak-that-the-only-way-is-up-42181)