Corn Prices Drop Amid Technical Selling and Favorable Weather Forecasts

Corn prices declined due to technical and fund selling. The key question is whether the remaining corn acreage will switch to beans or be enrolled in prevent plant programs, as some U.S. areas are now past the optimal planting window. The USDA will release acreage totals at the end of the month. The trade is also monitoring Brazil's early second crop harvest. Export and ethanol demand remain strong. The U.S. Energy Information Administration reported that ethanol production averaged 1.072 million barrels per day last week, the highest in two months, with domestic supply at a 24-week low of 23.052 million barrels.

Ethanol production surged in the early 21st century due to policies aimed at reducing foreign oil dependence. Although ethanol production has stabilized, it still accounts for about 35% of domestic corn use.

Ethanol, mainly derived from corn in the U.S., is blended with gasoline at a 10% ethanol to 90% gasoline ratio. Ethanol production has plateaued over the past 15 years but still uses a significant portion of U.S. corn. The prices of corn and ethanol futures are positively correlated, yet they can move independently due to various factors.

Moreover, corn futures are physically delivered and listed to expire in specific months, while ethanol futures are financially settled and listed monthly. These differences, along with unique supply and demand factors, contribute to independent price movements in each market.

Corn futures showed slight weakness on Wednesday morning, trading fractionally lower, with the December contract experiencing the most significant drop. This decline was primarily due to expectations of favorable growing weather in the U.S. over the next week. Projections for the USDA weekly export sales report for the week ending May 30 range from 550,000 to 1.2 million metric tons (MMT).

Corn prices tested the key resistance level of $449.20 but remained below it, maintaining a bearish trend influenced by a previously completed double top pattern. The next main target is $433.50, supported by the EMA50. It is crucial for prices to stay below $449.20 to achieve the anticipated targets. The expected trading range is between $437.00 support and $449.00 resistance.

Data for Technical Analysis (1D) CFD US Corn Futures - Jul 24 (ZCN4)

Resistance : 442.77, 444.13, 446.32

Support : 438.39, 437.03, 434.84                         

1D Outlook

Source: TradingView                                           

Buy/Long 1 If the support at the price range 433.39 - 438.39 is touched, but the support at 438.39 cannot be broken, the TP may be set around 442.78 and the SL around 431.00, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 442.77 - 447.77, TP may be set around 451.20 and SL around 436.00, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 442.77 - 447.77 is touched, but the resistance at 442.77 cannot be broken, the TP may be set around 437.04 and the SL around 450.00, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 433.39 - 438.39, TP may be set around 428.50 and SL around 445.00, or up to the risk appetite.       

Pivot Points Jun 6, 2024 03:43AM GMT

Sources: OpenMarkets, Economies.com