Morning Futures Roundup

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Prices Fail to Stall Corn Demand

 Fundamentals

Corn futures have rallied to their highest level since mid-2008 on expectations that Wednesday's USDA report will show lower ending stocks. Increasing prices have done little to curb demand, and there is talk that the USDA will increase its ethanol usage forecast. Asian demand, especially from China and Japan, continues to move forward at an extremely brisk pace. Speculation that Chinese imports of the grain will increase to the tune of 9 million metric tons has provided strong support and appears to have shaken detractors out of the market for the time being. This is more than double the previous record Chinese demand of 4.3 million metric tons in 1995.

Surprisingly, feedlot demand for grains has remained strong. The pullback in energy prices seems to have little effect on trading ahead of the production and supply and demand reports. In addition to the pullback in energy prices, prices of Corn in the US are higher than prices in China, which could have an adverse impact on prices if the USDA ending stocks figure exceeds expectations. Because of the report's impact on trading activity, some traders may expect to see choppy trading today, as traders fine tune their positions ahead of the USDA data.


 Technical Notes

Turning to the chart, we see the March Corn contract continuing to breakout from the pennant on the daily chart. Prices may not meet any significant resistance until they reach 712.50, the close on June 24, 2008. The uptrend that began in July has steepened in recent months, which could be seen as an indication that the market may be getting parabolic. It is interesting to note that the RSI indicator is diverging from prices, which can be seen as a negative. The indicator has come down from overbought levels, despite the strength of Corn.


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