Morning Futures Roundup

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Will Corn's Recent Sell-off Lead to Higher Prices in 2012?


   Fundamentals

Corn futures prices have been pummeled the past several sessions, as many traders have been in a commodity liquidation mode tied to continued fears of a return to a global recessionary environment. This fear has taken the current tight supply outlook out of the equation in many traders' minds, as a move to cash and cash-related assets has moved to the forefront. Somewhat ironically, the recent price declines may be setting-up this market for a large up-move later this year if the expected "rationing" of supplies does not occur if buyers are drawn to purchase Corn at prices sharply lower than a few weeks ago.

Weekly Corn exports came in at 598,100 metric tons, which was within expectations. This was before the sharp sell-off in futures prices, so we may see some additional interest in purchase in the coming week. So far this year we are at almost 36% of USDA export estimates, which is nearly 10% above the 5-year estimate for this timeframe. Many traders will be especially keen for any reports of interest in Corn from China, because some traders believe China will need to import more feed grains than originally anticipated to meet their growing livestock industry. There is little evidence that the reported slowdown in the Chinese economy is affecting the demand for protein so far, and if true, this will further increase the need to import grain, and buyers there will need to obtain supplies while prices remain at reasonable levels.



   Technical Notes

Looking at the daily chart for December Corn, we notice the recent sell-off has taken prices near the 38.2% Fibonacci retracement level from the July 2010 lows. Prices are now flirting with the 200-day moving average, but have not yet reached the uptrend line drawn from those key lows. The 14-day RSI has moved into oversold territory, with a current reading of 26.17. Chart support is seen near the 50% Fibonacci retracement level and the July 1st low of 575.50, with resistance seen at the July 21st low of 663.25.


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