Morning Futures Roundup
That's a Lot of Corn!
They say the cure for high prices is high prices, and that certainly seems to be the case with the Corn market, as favorable new-crop prices apparently are encouraging U.S. producers to dedicate the highest amount of acreage to Corn plantings since 1944! This estimate comes from the USDA's outlook forum where it was predicted that 94 million acres will be planted to Corn this coming season.
The USDA is expecting a whopping 14.27 billion bushel production from these 94 million acres, compared to 12.358 billion bushels this past season. If the estimate process is accurate, this would be a production record. The 14.27 billion Corn crop assumes above baseline yields, so early plantings and ideal weather this summer would be needed to meet this production level.
This outlook has pressured the new-crop December futures especially hard, as it appears that assuming at least baseline yields and current demand expectations, we may have more than ample Corn supplies this coming season. The picture for old-crop Corn is not quite so bearish, as increased Chinese imports and a less than stellar production outlook from Argentina should help to keep a steady bid under May and July futures in the coming weeks.
Looking at the daily chart for the May/December Corn spread, we notice a break above previous resistance at an 80-cent May premium on Thursday. In addition, the 20-day moving average (MA) has crossed above the 200-day MA, which is considered a bullish signal. The 14-day RSI has begun to strengthen, with a current reading of 64.85. The next resistance point for the spread is seen near the 100 level, with a move above this point setting-up a test of the 125 area. Support is seen at the 200-day MA, currently near the 72.50 area.
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