Commentary
In my view, December Corn futures rebound the past week again illustrated the resilience of the market’s low-$5.00’s unofficial floor and bolstered ideas harvest lows have been posted. The market could potentially see sideways-to-slightly-higher price action leading up to USDA’s Nov. 9 Crop Production Report. But late-year rallies have historically been modest in my opinion and given the current inflationary undertone in commodities, one can discard any seasonal tendencies. That said, a rally the $5.62-$5.80 range, should we get there, may be viewed as a hedging opportunity for Producers. Outside factors, such as crude oil prices and Brazil weather, could have increasing influence. However in my view, managed money flow will likely be the primary driver of prices. Funds have cut their net long positions, but are still heavily long. The latest CFTC report showed managed funds still long 219K contracts. Longer term, we’re still stuck with the limited global supply of fertilizer, and the resulting high prices. That in turn could impact 2022 global crop production, possibly stretching into 2023 as well.
That fact in my view has contributed to the corn market trying to carve out a harvest low while supporting stronger than normal cash basis in the country. I don’t think the managed money sector has yet to comprehend the implications of high input costs on farmer production decisions. In fact, I don’t think the implications are understood by many. Its that uncertainty that has buoyed price for now. A rising wheat market that had December Minneapolis futures settling above $10.00 today has certainly aided corn to the upside as well. No trade recommendations on this report. A fifty percent retracement of the December Spring high to the September Spring low, comes in at 5.67. that could be a near term target should the market extend higher in my opinion.
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