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Corn Runs on Speculative Longs, Finds Support... Then Fireworks


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Strategy of the Day 1.17.2020

Corn Runs on Speculative Longs, Finds Support

March 2020 Corn futures are trading up 13 cents as of writing this report, recovering all of yesterdays nasty hair on fire sell off and then some. The selloff was sparked by the news that Mexico will be reducing its ethanol mandates (seen as negative for US corn exports). This news has me scratching my head, as just last month Mexico went on record with its 4th largest purchase of US corn in USDA history; so there may be another story developing in Mexico regarding their demand picture (more livestock perhaps; in anticipation of Asian demand? stay tuned). With that being said, US exports were reported yesterday for both corn and soybeans, with corn shipping 784k tons and may be a reason we have seen such a strong snap back reversal higher today.

In yesterdays STOD live video, I mentioned that the commitment of traders report has shown the non-commercial non-reportable position carrying a net long of over 80k contracts in the corn the last two weeks (and into the signing of the Phase One deal). The yellow vertical line is the date at which last weeks commitment of traders data was surveyed at 80k, while this weeks survey (from 1/14, the day before the Phase One signing) shows a slight reduction in their position to 76k. If I am correct, we may see this position reduce further by next week, as the volatility of the last 48 hours may have scared more speculative longs out of the market. This speculative long position was effectively punished by the market in the last 24 hours, with what looked like a run on their position to push them out of the market. The March corn traded below the January 10th WASDE and Quarterly Grain Stock report low, likely triggering stops for any traders using that low to manage risk but has reversed higher now after what can only be assumed as commercial buyers taking advantage of lower prices.

From a technical perspective, March 2020 corn is still very much in a range between its 392.25 November WASDE news high (also highs for the month of December and January) and the low end of that range formed by the contracts November and December lows (373 and 371 respectively). Today price rallied beyond yesterdays high, which in and of itself is a bullish signal, however, to have done so after such a decline yesterday suggests that there is a considerable fight going on in this market over the direction of corn. I am still expecting the market test back towards the $4.00 area, if the momentum of todays moves carries through the 392 resistance and we break the downward sloping trendline resistance (yellow dashed line on chart) which currently comes in at about 387. Its a range until its not, and consolidation has proven to wipe the order book clean multiple times between the 390 and 375, but the impressive reversal in corn has my attention again and expecting a test to of January highs in a period of price discovery for the bulls.

Dan can be reached at (312)277-0110 with any question or further comments, and you can click here to get access to the Zaner Ag Hedge daily newsletter to receive his emailed commentary daily!


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March 2020 Corn 60 min Chart



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About the author


Dan began his career in 2006 as an arbitrage and clearing clerk for Spyglass Options in the Eurodollar futures options pit on the floor of the Chicago Mercantile Exchange. Taking his employing brokers advice, Dan soon left the floor to pursue a career “behind the screens upstairs”, as there was an inherent lack of opportunity for market making in open outcry pits. After graduating from the University of Notre Dame in 2009 (and for the subsequent 10 years), Dan leveraged his IT background in networking and computer programing to begin developing computerized trading algorithms and trading systems for multiple private equity firms and his own account. He eventually found his specialization in trading carry trade dynamics in currency and interest rate futures; while simultaneously building his experience in trading both inter-market and intra-market spreads. His trading experience later expanded to include most commodity spreads, with an emphasis on carry trade economics in agricultural commodities. In 2016 Dan decided to take his career full circle by becoming a series 3 and 34 licensed broker; and expanded his outreach to the agriculture production community. In 2018, he joined Zaner Financial Services Ag Hedge division, bringing his knowledge and expertise of carry trade economics and continues expanding exposure to spread markets. Dan can be reached at (312)277-0110 by phone, @DanielHusseyJr on twitter, @DanSOTD on facebook, and emailed at dhussey@zaner.com.
 
 
Contributing author since 2/15/2019 

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