Technically Speaking

December Corn Coiling for a Breakout

Dana Mantini
By  Dana Mantini , Senior Market Analyst
Here is a daily chart of December corn futures that shows a symmetrical triangle pattern, with the upper trendline near $5.95 and the lower trend line figuring $5.45. A convincing close either side of that range is likely to lead to a new leg on corn.

DECEMBER CORN FUTURES:

For the past three months, December corn has traded in a narrowing range, with lower highs and higher lows. December appears to be coiling in a triangle chart pattern, likely to result in a breakout one way or the other. For the past two to three weeks, new-crop corn has been glued to the $5.50 area. With the ongoing drought conditions in the Dakotas and Minnesota a,nd hot and dry weather in the Western Plains, the logical direction for corn yields would be to move lower from USDA's record large projection of 179.5 bushels per acre. However, as bad as the Western Corn Belt and Northern Plains might be, the Eastern Corn Belt could possibly have record or near record yields. It is likely that a convincing break and close above $5.95 or below $5.45 would signal the next big move for December corn. Thursday's USDA August report could give us some clue as to what direction corn might go.

NOVEMBER CANOLA FUTURES:

Although November canola futures recently had a healthy correction from recent highs, it still appears as if the market is consolidating in a bull flag chart pattern. Expectations by private analysts are for Canada's canola production to possibly fall as low as 15 million metric tons (mmt) or lower, as drought has enveloped much of the Canadian Prairies. Although both palm and bean oil futures have also retreated from the highs, world veg oil markets remain bullish with tight supplies and solid demand. The spread of COVID-19's delta variant has thrown some caution into demand lately.

U.S. DOLLAR INDEX:

Recent strength in the U.S. Dollar Index has inserted a bearish factor into commodities, although it has done little so far to offset declining wheat production and solid demand for wheat. However, a rally and close above the $93.50 level (currently at $92.81) could send ag commodities lower. That is something to keep an eye on, especially if the Federal Reserve decides to raise interest rates to offset the rampant inflation that we have seen lately.

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Comments above are for educational purposes and are not meant to be specific trade recommendations. The buying and selling of grain and soybean futures involve substantial risk and are not suitable for everyone.

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

Follow Dana on Twitter @mantini_r

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