Upward Momentum in U.S. Corn Prices Faces Challenges

U.S. corn prices experienced an upward trend earlier this week due to short covering and technical buying, lifting contracts from recent lows. The market is closely monitoring dry conditions in Argentina, which may impact crop ratings. Second crop planting in Brazil is progressing, while the USDA's updated projections, CONAB's outlook for Brazil, and the U.S. Energy Information Administration’s ethanol numbers are anticipated on February 8th.

Analysts observed a rally in U.S. corn futures following bargain buying, driven by recent multi-year lows. Commodity funds hold significant net short positions, prompting traders to assess whether prices will further decline or if current fundamentals have been absorbed. Slow demand persists in the grain markets, fueled by a U.S. corn surplus. Concerns about China's economic slowdown have intensified following the insolvency of China Evergrande Group, the world's most indebted real estate developer, raising fears of reduced demand for U.S. agricultural commodities.

China's recent economic stimulus efforts, including a fund injection and a significant cut in banks' reserve requirements, initially had a positive market response. However, this momentum waned as key indicators in Asian markets failed to rally, contributing to concerns about macroeconomic demand. The World Bank's projection of China's slowest GDP growth in 30 years adds to the uncertainty, potentially impacting U.S. exporters in 2024.

The U.S. corn outlook for 2023/24 indicates greater production, higher food, seed, and industrial use, increased feed and residual use, and elevated ending stocks. Despite record corn production, slow demand leads to a rise in corn stocks. Globally, coarse grain production for 2023/24 is forecasted to increase, with changes in foreign production, trade, and stocks. The USDA's recent Grain Crushings report indicates fluctuations in corn use for fuel ethanol production. Export inspections report increased corn shipments, with accumulated exports ahead of last year's pace.

South Korea's Feed Leaders Committee and the Korea Feed Association have issued tenders to purchase corn from optional origins. Asian corn purchase interest rose after a one-week low in Chicago corn futures.

Technical analysis indicates a bearish trend in corn prices, with potential for further decline. The market is closely watching key support and resistance levels. Recent trading sessions saw corn futures rallying but still within the downtrend.

Data for Technical Analysis (5H) CFD US Corn Futures - Mar 24 (ZCH4)

Resistance : 448.53, 449.05, 449.91

Support : 446.81, 446.29, 445.43                                        

5H Outlook

Source: Investing.com                   

Buy/Long 1 If the support at the price range 444.81 - 446.81 is touched, but the support at 446.81 cannot be broken, the TP may be set around 448.96 and the SL around 443.00, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 448.53 - 450.53, TP may be set around 451.20 and SL around 445.00, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 448.53 - 450.53 is touched, but the resistance at 448.53 cannot be broken, the TP may be set around 446.72 and the SL around 452.50, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 444.81 - 446.81, TP may be set around 444.45 and SL around 450.50, or up to the risk appetite.       

Pivot Points Jan 31, 2024 10:46PM GMT