Trading the largest U.S. corn crop in history

July 2, 2013 09:48 AM

Last week Sept 2013 (old crop) corn (CBOT:CU13) opened the week at $5.86 per bushel and closed the week at $5.47¼. Dec 2013 (new crop) (CBOT:CZ13) corn opened the week at $5.47½ and closed the week at $5.11. On Friday we saw a large drop in corn with Sept 2013 down $0.25. This was caused by the USDA Acreage report released that day confirming the U.S. corn acreage planted at 97.4 million acres, a slight increase from last year. This corn acreage is the highest planted since 1936 when an estimated 102 million acres were planted. For average yields far higher now than back in 1936, if all goes well with growing season the 2013 corn harvest will be the highest on record. Reported in the previous WASDE, if this is recognized then the world supplies of corn will be at 12-year highs.

Proceed to Page 2 for the latest COT Data...

COT Data

In the older, less transparent Legacy COT we see Commercials at a 52-week net high of –24,694 contracts net short. This is far different than the 52-week net low of -288,314 contracts net short we saw in the Dec. 7, 2012 COT report. In the newer more transparent Disaggregated report we have seen Producers drop net shorts now -282,475 contracts as Swap Dealers dropped net longs now 257,781 contracts. The difference between these two numbers is -24,694. That is the number from the older Legacy report and that is the correlation between the two reports. Managed Money has been dropping net longs and is currently net long 104,781 contracts. So what does all this mean? Once we see big money leave the bearish posture they have been in, corn prices will start rising. At this time the U.S. growing season looks to be doing well with corn well above the “knee-high by the 4th of July” target in many places. And if this continues it may not be a matter of when will corn start rising, but how low will corn go? Could we see $3.40 like we saw in June 2010? Could be, but also keep in mind back then the U.S. Dollar Index was trading in the high 80s not low 80s. A weakening USD could help keep corn price higher than back in 2010.

If you need help understanding how to understand how to use the NEW COT report to your benefit get instant access to my new e-book "What Lies Beneath ALL Trends". It is filled with eye opening information.Commercial Net Tracker instructions: This form tracks the Commitment of Traders (COT) data for the commodity futures market. This form "looks" at the most recent five weeks of COT data and provides visual indications of the data. A) If the current value is at a 12-month low, the cell will display a red/burgundy background. B) If the current value is at a 12-month high, the cell will display a green background. C) If the current value went from net negative to net positive, the cell will display a blue background (indicating a bullish condition). D) If the current value is both a 12-month high and also went from a net negative to a net positive, the background will be green. You should view the data with green backgrounds to determine if they also went from net negative to net positive.

Proceed to Page 3 for this week's detailed fundementals...

Technicals

On the Sept 2013 daily chart below we see ADX on the rise now over 30 with a large DI Differential reflecting a strong trend. MACD is bearish and Stochastics are in oversold territory. We see the price action on June 24 bringing the 4-day ema crossing down below the 9-day ema. Also on that day the close was below the 4-, 9-, and 18-day emas. On the chart we see the number to watch for a close below $5.40. The last four times we saw price action below $5.40 the market came up and did not close below this.

Click to enlarge.

On the weekly chart (normally I use a weekly nearest, today I am looking at a weekly contract chart) we see ADX at 20.9 reflecting a weak trending market. Weekly range $5.40-$6.00.

Have a prosperous trading week.

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