US Corn Prices Decline; Concerns Mount Over Southern Brazil's Dry Conditions

Corn prices experienced a decline due to fund and technical selling pressures. Planting progress in the U.S. reached approximately 2%, with some regions facing rain delays. Dry conditions in southern Brazil are concerning for second crop corn production, potentially limiting output. Reports suggest that planting for the second crop is nearly complete, with forecasts projecting a decline in production compared to previous estimates.

Following the USDA's announcement of lower-than-expected inventory and planting intentions, corn prices surged. The USDA's planting intentions report, which indicated a reduction in corn planting for the upcoming year, particularly bolstered market sentiment. Traders are monitoring corn demand closely, noting strong demand at lower price levels. Despite ample supplies and reports of limited demand, market sentiment remains positive, with expectations of a short covering rally.

In China, customs authorities have requested traders to limit deliveries of foreign corn into bonded areas, aiming to alleviate domestic oversupply and support local prices. This move could potentially impact global prices, given China's status as a major importer. While Chinese corn futures experienced a modest increase, concerns persist regarding the impact of import restrictions on global prices.

The economic landscape for corn producers in 2023 received a notable boost from beef and pork exports, valued at $18.1 billion. A study by The Juday Group, commissioned by the U.S. Meat Export Federation, highlighted the significant contribution of red meat exports to corn and soybean values per bushel. The study underscored the interconnectedness of livestock and crop production, emphasizing the importance of sustainable agricultural practices and feed efficiencies in maintaining competitiveness in global markets.

Chicago corn futures remained steady near $4.3 per bushel, following the USDA's Prospective Plantings report, which projected a 5% reduction in corn plantings for 2024 compared to the previous year. Despite this, the market's positive momentum was constrained by record-high stocks, reaching 8.347 billion bushels as of March 1st. Additionally, smaller yields are anticipated in South America, particularly in Argentina and Brazil.

In Mississippi, row crop producers are planning to adjust their planting strategy for 2024, with intentions to reduce corn plantings by 25% and increase cotton plantings by the same percentage compared to the previous year. The decision to pivot from corn is influenced by several factors, including high corn plantings in the previous year leading to substantial carryover stocks, which in turn has weighed on corn prices.

Moreover, changes in market sentiment and speculative positioning are influencing futures trading activity. Speculators maintained a significant short position in Chicago corn futures, although slightly increasing their net short positions in the week ended March 26. This positioning, resembling early 2019 patterns, leaves investors vulnerable to market dynamics, particularly amidst uncertainties regarding weather patterns and global production.

In technical analysis, the corn price encountered strong resistance at $449.20 before bouncing downwards. Consolidating above the key support level at $433.50, the price maintains potential for continuing the correctional bullish trend, supported by stochastic reaching oversold areas. Positive trades are anticipated in upcoming sessions, with the first target being a retest of $449.20. However, breaking below $433.50 would halt the bullish scenario and could lead to further price declines. The expected trading range is between $430.00 support and $445.00 resistance.

Data for Technical Analysis (30Min) CFD US Corn Futures - May 24 (ZCK4)

Resistance : 427.55, 427.67, 427.86

Support : 427.17, 427.05, 426.86                            

30Min Outlook

Source: TradingView                               

Buy/Long 1 If the support at the price range 426.97 - 427.17 is touched, but the support at 427.17 cannot be broken, the TP may be set around 427.62 and the SL around 426.87, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 427.55 - 427.75, TP may be set around 428.10 and SL around 427.07, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 427.55 - 427.75 is touched, but the resistance at 427.55 cannot be broken, the TP may be set around 427.12 and the SL around 427.85, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 426.97 - 427.17, TP may be set around 426.65 and SL around 427.65, or up to the risk appetite.       

Pivot Points Apr 3, 2024 05:58AM GMT