Technically Speaking

The corn market appears to be two-tiered in a sense, with spot corn futures moving up on solid demand and the foregone conclusion that even after raising U.S. corn exports in the April WASDE, USDA is still underestimating old crop corn demand. In the past week, two more sales were announced to Portugal and Japan along with rumors that Spain might be buying more May-June corn, and Mexico might be inquiring for summer corn.

In the new crop slot, corn seeding efforts are in the early stages with national corn progress at just 4% as of Sunday, April 13, and slightly behind the average pace. In the western and central Plains, there is a mostly dry pattern in the next week to allow for a quicker seeding pace. However, in the very soggy and still flooded Delta and southern Midwest areas, there is more unwanted rain ahead. A change to a mostly dry pattern over the next few weeks would surely pressure December. Also, assuming no extended planting delays, the consensus is that additional corn acres could be 4.7 million acres or more than a year ago, at an estimated 95.3 million acres.

The $4.80 to $4.90 area on the weekly chart should provide very strong overhead resistance if we first bust through the trend line close to $4.70. That should be one major stumbling blocks for new crop corn in the absence of a budding summer drought. With old crop demand likely to be even higher and carry-in lighter, strength in old crop futures could prevent any sort of major sell-off. However, the market is getting overbought in the December futures, and in the short term, it appears we will see a correction soon.

Kansas City July Wheat:

For the last 16 days, KC July wheat has been trading within a narrow 18-19 cent range, bounded by $5.66 on the downside and $5.85 on the upside. Hard winter wheat areas, and especially Colorado and Kansas have been suffering through mostly warm and dry weather for weeks. The weekend ahead promises some rain to hit the southwestern Plains capable of improving the current poor conditions. Last week's Crop Progress report revealed a good to excellent national winter wheat rating at 47% with Kansas more like 43% good to excellent. The national reading would compare to last year's 55% reading at this time of year.

Funds do remain short an estimated 46,000 contracts of KC wheat in addition to 91,000 of Chicago wheat as of a week ago, putting the total combined short at the equivalent of 685 million bushels (mb). Typically, a market that moves in a sideways range will break out above or below that range at some point. With the extent of the fund short in wheat in the absence of the predicted moisture ahead, we could very well break out to the upside -- just something to watch.

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Comments above are for educational purposes only and are not meant as specific trade recommendations. The buying and selling of commodities, futures or options involve substantial risk and are not suitable for everyone.

Dana Mantini can be reached at dana.mantini@dtn.com

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