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NEAR-TERM MARKET FUNDAMENTALS: With a strong correlation with the energy markets, reports of higher than expected yields from the field and massive fund trader long liquidation selling, the market remains in a steep downtrend. The market is in a short-term oversold condition but recent COT reports show a large net long position from funds and speculators and harvest-time prices are at a record high. China prices are also high into their harvest but even the extreme tightness outlook for this season does not seem to be enough to offset the long liquidation trend. Hedge funds are shifting out of agricultural markets and this has pressured markets across the board. Fears of global deflation and very slow or no growth due to economic actions in Europe and the US remains as a perceived threat and this has sparked the selling trend. Funds were active sellers for much of the session yesterday and continued to sell overnight to push the market to the lowest level since July 12th with December corn now down as much as $1.35 1/4 off of the August 29th peak. While there are still supply concerns, traders believe the corn market was “pricing in” a steady global growth theme for commodity markets but after the Fed actions this week and European and China growth numbers yesterday, traders are seeing more of a global deflation theme to commodity markets. Supply fears have moved to the sidelines with a focus of attention on demand concerns and on shifting flow of capital as traders see commodity markets as a risky investment. Weekly export sales came in at 598,100 metric tonnes which was in line with trade expectations. As of September 15th, cumulative corn sales stand at 35.9% of the USDA forecast for 2011/2012 (current) marketing year versus a 5 year average of 26.8%. Sales of 535,000 metric tonnes are needed each week to reach the USDA forecast. News of strong demand long term from China and news from a weather firm of another adjustment lower in US corn yield this season failed to provide much support. The International Grain Council cut their forecast for global corn production by 4 million tonnes to 845 million tonnes. South Korea bought 55,000 tonnes of US corn overnight. China feedgrain officials believe the country may have a short-fall of near 15 million tonnes per year by 2015 as the country sees increased needs due to expanding meat and egg production.
TODAY’S GUIDANCE: Global economic slowdown fears are accelerating and while China corn demand may be stronger than expected for the coming year, fund traders are in a long liquidation mode and selling could intensify ahead of the stocks report at the end of the month. Higher yield talk and a surging dollar are other bearish forces. While the October 12th report could be quite bullish, investors are stepping to the sidelines now.
TODAY’S MARKET IDEAS: December corn resistance is at 666 1/2 and 677 1/4, with 634 1/2 as next support.
Corn: Still in Long Liquidation Mode as Bargain Hunters Looking at Wheat
by Terry Roggensack on September 23, 2011
Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!
NEAR-TERM MARKET FUNDAMENTALS: With a strong correlation with the energy markets, reports of higher than expected yields from the field and massive fund trader long liquidation selling, the market remains in a steep downtrend. The market is in a short-term oversold condition but recent COT reports show a large net long position from funds and speculators and harvest-time prices are at a record high. China prices are also high into their harvest but even the extreme tightness outlook for this season does not seem to be enough to offset the long liquidation trend. Hedge funds are shifting out of agricultural markets and this has pressured markets across the board. Fears of global deflation and very slow or no growth due to economic actions in Europe and the US remains as a perceived threat and this has sparked the selling trend. Funds were active sellers for much of the session yesterday and continued to sell overnight to push the market to the lowest level since July 12th with December corn now down as much as $1.35 1/4 off of the August 29th peak. While there are still supply concerns, traders believe the corn market was “pricing in” a steady global growth theme for commodity markets but after the Fed actions this week and European and China growth numbers yesterday, traders are seeing more of a global deflation theme to commodity markets. Supply fears have moved to the sidelines with a focus of attention on demand concerns and on shifting flow of capital as traders see commodity markets as a risky investment. Weekly export sales came in at 598,100 metric tonnes which was in line with trade expectations. As of September 15th, cumulative corn sales stand at 35.9% of the USDA forecast for 2011/2012 (current) marketing year versus a 5 year average of 26.8%. Sales of 535,000 metric tonnes are needed each week to reach the USDA forecast. News of strong demand long term from China and news from a weather firm of another adjustment lower in US corn yield this season failed to provide much support. The International Grain Council cut their forecast for global corn production by 4 million tonnes to 845 million tonnes. South Korea bought 55,000 tonnes of US corn overnight. China feedgrain officials believe the country may have a short-fall of near 15 million tonnes per year by 2015 as the country sees increased needs due to expanding meat and egg production.
TODAY’S GUIDANCE: Global economic slowdown fears are accelerating and while China corn demand may be stronger than expected for the coming year, fund traders are in a long liquidation mode and selling could intensify ahead of the stocks report at the end of the month. Higher yield talk and a surging dollar are other bearish forces. While the October 12th report could be quite bullish, investors are stepping to the sidelines now.
TODAY’S MARKET IDEAS: December corn resistance is at 666 1/2 and 677 1/4, with 634 1/2 as next support.
Tags: Corn, Grains
About Terry Roggensack