Grain Spreads: Corn Follows The Leader

Sean Lusk General Commentary Leave a Comment

Corn futures finally broke rallied past the 3.70 level for its highest close since March. A long time coming. 10.00 beans one reason why along with trend and index following funds that have flipped from a sizable short to approximately a 40 to 50K contract long. Funds and speculators in my view are taking note of crop damage in China stemming from three late-season typhoons following flooding earlier in the season. That issue combined with high Chinese corn prices and reports of depleted stockpiles has some analysts calling for a potential jump in Chinese corn imports. Industry sources are signaling China could bring in 15 MMT to 30 MMT of corn, with most estimates coming in the 20 MMT to 25 MMT range. In contrast, USDA last week projected China would import just 7 MMT of corn in 2020-21.  A potential could knock down ending stocks below 2 billion bushels. In my view, funds could rally corn to pre-covid levels or a least push the market to unchanged on the year at the 50 percent Fibonacci level at 3.88. A continued rally push corn to the 4.00 level. (See Chart) In my opinion I think a close over 373 is needed to prod funds and specs to increase their longs in the market. Todays close puts the market over the 50 and 200 moving average, over 373 and we clear a big trendline and over the 100 day as well. I know the market may see some harvest pressure upcoming as we come in 5 percent harvested as of Monday. However thoughts of Chinese buying amid inflationary pressures may keep this market bid in the near term.

Dec 20 Corn

Trade Ideas

Futures-Buy the Dec 20 Corn futures on a close over 373.

Options-N/A

Risk/Reward

Futures-Place a stop under 3.64 risking 9 cents or $450.00 plus commissions and fees. Its a pretty generic strategy here but sometimes its best to keep it simple. Im looking for a move to 3.88 and if that gets taken out a move near 4.00.

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