Short term
Trade view / 06 September 2016 at 12:51 GMT

Corn to dip on enhanced yield expectations

Managing Partner / Spotlight Group
United Kingdom

Many grain commodity watchers had wondered if futures that are at multi-year lows could book a bounce back today. The pattern, however, does not look encouraging based on the early trades.

The time technicals are heavily tilted toward a sell scenario as only the daily is neutral; all others are listed as sell or strong sell.

One reason for the soft tenor at the start of this week is that INTL FCStone announced rather late on Friday an upbeat US crop yield estimate of 175.6 bushels/acre for corn. That was an upgrade of 0.6 bushels/acre on the commodity broker's estimate last month. 

It was also above the forecast of 175.1 bushels/acre by the US Department of Agriculture. The government body will update its figures September 12 in the monthly Wasde crop report.

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Source:,  Spotlight Ideas

I think the play is from the short-side, but only in the short-term. I take this view as one has to think that corn prices are close to locking in crop insurance floors. Therefore, grain farmers are expressing a degree of reluctance to be sellers at these levels.

The mood is that farmers holding back and leaving the selling to speculators who are already tipped quite bearish. I know the technicals are gloomy but it would only take the yield reports the next two to three weeks to show an indication of doubt of the 175 bushels/acre outlook for short covering by funds and end-users to be activated.

Corn (five-year):
Source: Spotlight Ideas

Parameters (Corn ZCZ6 December 2016, US cents/bushel)

Entry: sell 326.25 1235 GMT

Targets: 324.10... 321.75... 319.09.

Stop: 331.00.

Time horizon: short-term.

— Edited by Michael McKenna

For more on commodities click here.

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