Morning Futures Roundup
Weather in South America has Corn Prices Popping!
A winter bull market in Corn futures is unusual, but not unheard of -- especially with the growing importance of South American grain production in the world export market. The current issue is the hot and dry conditions seen in Argentina, which is the world's second largest Corn exporter. The unfavorable weather comes at a most inopportune time, as the Corn crop enters the key pollination period. The Corn growing regions of southern Brazil are also lacking moisture, and unless rain is forecast soon, analysts may begin to lower South American Corn production estimates rather substantially.
Reports that Russia is looking to purchase Argentinean Corn and China's huge appetite for commodities, especially grains, are also seen as supporting factors for Corn prices globally. The most recent Commitment of Traders report shows large speculators increasing their already large net-long position in Corn futures and options to nearly 415,000 contracts as of December 21st. This extremely large net-long position will need further bullish news to continue the upward momentum, and a near-term price correction would not come as a big surprise to most traders. However, any near-term weakness in prices may be short-lived, especially if weather conditions do not improve soon in Argentina and Brazil.
Trading volume during the recent rally has shown a steady decline. This may be due to the holidays in December, when many traders are away from the trading desks. Additionally, the 14-day RSI has moved into overbought territory and still has not made a higher reading, despite Corn trading at contract highs. 630.00 is seen as the next resistance point for March Corn, with support found at the 20-day moving average currently near the 586.50 area.
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