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Chicago Corn : Supply surplus

05/16/2012 | 09:07am
Opinion : Bullish above  670
Target price :  750
Corn is the most cultivated grain in the world, is listed on the Chicago Board of Trade (CBoT), the most important stock exchange for agricultural commodities. Over 70% of world wide production is meant for animal feed, and the rest is used by industry.

The 2011-2012 harvest was characterized by drought in Americas, the largest producer, which caused a sharp fall in the stocks. Corn production for 2012/13 is projected at a record to 14.8 billion bushels up 2.4 billion from last season, according to U.S. Department of Agriculture’s report, thanks also to a favourable climate. Also Asiatic supply could grow, especially China in fact is of yesterday the news announced that China (second largest producer in the world) may expand the area planted with corn by more than 2%. World corn ending stocks for 2012/13 are forecasted over than 150 million tons, the highest level since 2000/01, according USDA. This outlook has pushed corn futures contracts in a situation of “backwardation” with long expiries cheaper than short, the spot price is trading with a discount nearly $100 against contract expiry September 2012.

Past trading sessions showed a return of nervousness on corn price, the volatility index is returning close to 30 points. Last week all commodities declined, and corn was the second worst performance with loss nearly 9%.

On daily data, the commodity is trading in a range between USD 600/670, characterized by erratic movements. In weekly data, the last acceleration was stopped by a transversal resistance, with the highest descendant. For the next session, we forecast that accumulation phase inside a “triangle” could continue. We advise to follow the corn with attention since mid-June, in fact the commodity could take benefit from “seasonal effect”. The break out of transversal resistance could throw corn towards area of USD 750.
Chicago Corn : Chicago Corn : Supply surplus
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