Corn futures rallied on Monday as strength in the wheat spilled over into the corn pit. Commercial buying was also noted and could be interpreted as exchange of futures on cash sales because of foreign demand. You need to be aware that flooding in the winter wheat areas of AR, MO, IL, IN and KY could find wheat abandonment in favor of additional corn acres on last year's soybean acres. You also need to keep your eye on China's northeast prime growing region, as since the month of January 2008, the region has averaged less than 50% of normal precipitation.
July corn has immediate technical support at 5120 and resistance at 5600 and the trend is down. December corn futures have technical support at 5100 and resistance of 5450 and likewise the near term trend is down. Looking at new crop corn, the total amount Allendale has hedged as a percent of anticipated 2008 production is 25%. Key support for the December 2008 contract is 5100 with a break below 5174 a trader momentum shift point. The immediate technical trend is bearish. We will monitor and alert when to resume hedges. Allendale projects fewer planted corn acres in 2008 than 2007 and may likely result in projected 2008/09 end stocks of 617 million bushel compared to present 2007/08 end stocks of 1.422 billion bushels.
Technically futures were correcting from oversold status on a Monday. Long-term Allendale remains bullish to old and new crop given our outlook for reduced corn plantings in the spring of 2008. For the immediate timeframe, we are willing to sell a corrective rally but will utilize a risk reverse just above this market, in case funds are willing to jump back in on the long side, because of the strong fundamental outlook. Remember that next Monday will be the March Prospective Plantings and Quarterly Grain Stocks reports.
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