Corn Prices Dip Amid Uncertainty, but Strong Demand Limits Losses

Corn prices dipped slightly due to fund and technical selling, with the U.S. crop developing ahead of the average. Widespread harvesting is still weeks away, and there's uncertainty about how many acres will be harvested due to storm and flood damage earlier in the season. A major crop tour this week may suggest a potential yield reduction by the USDA in the coming months, though such variations are common due to differing methodologies and sample areas. Some southern regions may experience late development impacts from an expected warmer, drier weather pattern next week.

Corn's losses were limited by strong demand for feed, fuel, and exports. U.S. corn remains the most competitive on the global market, as basis levels in Brazil and Ukraine have risen. Safras e Mercado reports that 95% of the second crop in central and southern Brazil has been harvested, well ahead of both last year and the five-year average.

The 2024/25 U.S. corn outlook anticipates larger supplies, lower domestic use, higher exports, and smaller ending stocks. Beginning stocks are projected to be 10 million bushels lower due to slightly higher use in 2023/24. Corn production for 2024/25 is forecast at 15.1 billion bushels, an increase of 47 million from last month, despite a reduction in harvested area, thanks to a record yield forecast of 183.1 bushels per acre. Yields are expected to be higher in key states like Illinois, Indiana, and Iowa, while Ohio's yield is expected to be lower.

Total U.S. corn use for 2024/25 is forecasted to be 60 million bushels higher, with increased exports but lower usage for glucose, dextrose, and starch. As supply growth lags behind use, ending stocks are projected to decrease by 24 million bushels to 2.1 billion, with the average corn price expected to drop by 10 cents to $4.20 per bushel.

Globally, coarse grain production for 2024/25 is expected to decrease by 8.1 million tons to 1.504 billion, with lower production, trade, and ending stocks compared to last month. Foreign corn production is down due to lower yields in the EU, Russia, Serbia, Ukraine, and Moldova, largely because of heat and dryness in key regions. Corn imports are expected to rise in India and Zimbabwe but decrease in countries like Iran, Chile, and Vietnam. Global corn stocks are projected to decline by 1.5 million tons to 310.2 million.

On Wednesday, Chicago Board of Trade corn futures saw slight gains, with the most-active December contract rising by 1/4 cent to $3.98-1/4 per bushel. The increase was driven by hedge funds unwinding short positions and traders closely watching the Pro Farmer crop tour, which reported above-average yields in Nebraska and Indiana. However, these results have not significantly raised expectations for the upcoming harvest.

Market uncertainty is heightened by potential shipping delays due to a looming Canadian rail stoppage, as Canada is a key importer of U.S. corn. Additionally, the Buenos Aires Grain Exchange predicts a 17% decrease in Argentina's corn acreage for the 2024/25 season.

December corn futures remained mostly flat in the last trading session, keeping prices above the downward sloping trendline resistance. With the tight trading range, support and resistance levels have stayed relatively unchanged. Bulls are aiming for a close above 403 3/4 - 404 3/4 to gain additional upward momentum. The price has reached the initial target of $397.50, and positive momentum indicators suggest that the price may continue to rise toward the next target of $405.20. However, if the price drops below $387.30, the bullish trend would likely reverse, resuming the bearish direction. The expected trading range for today is between $390.00 support and $405.00 resistance.

Data for Technical Analysis (1D) CFD US Corn Futures - Dec 24 (ZCZ4)

Resistance : 399.95, 400.85, 402.3

Support : 397.05, 396.15, 394.70                        

1D Outlook

Source: TradingView                        

Buy/Long 1 If the support at the price range 392.05 - 397.05 is touched, but the support at 397.05 cannot be broken, the TP may be set around 400.40 and the SL around 389.55, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 399.95 – 404.95, TP may be set around 407.00 and SL around 394.55, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 399.95 – 404.95 is touched, but the resistance at 399.95 cannot be broken, the TP may be set around 396.60 and the SL around 407.45, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 392.05 - 397.05, TP may be set around 389.50 and SL around 402.45, or up to the risk appetite.       

Pivot Points Aug 22, 2024 03:00AM GMT

Sources: XM, Economies.com