Technically Speaking

Just when March looked like it was ready to turn lower, prices got an unexpected boost last week from increased concerns about the threat of Russian troops on Ukraine's border and how markets could be disrupted, should Russia invade Ukraine. Ukraine exports 16% of the world's corn and a significant threat to corn supplies does not seem likely. But the threat of a wider conflict is also influencing crude oil prices higher, affecting the price of biofuels. In the big picture, March corn prices have been moving higher since August 2020 and the latest rally since fall harvest has largely been supported by active ethanol production and dry weather concerns in southern Brazil and Argentina. Technically speaking, the trend remains up with resistance likely at the old May high of $6.40 1/2 and support at $5.68, the site of the 100-day average. Noncommercial net longs total 388,138 as of Jan. 18, a potentially bearish position, should prices break support.

Chicago ethanol prices have had quite a roller coaster ride since October, but turned quieter last week, slipping a penny to end at $2.14 a gallon on Friday, Jan. 21. The ride started with a surge of rising prices from mid-October to Thanksgiving that reached $3.75 a gallon and sent the value of ethanol and distillers grains $5.25 above the cost of the bushel of corn it took to produce them. After Thanksgiving, ethanol prices fell as rapidly as they had climbed, spooked initially by news of the omicron variant and then generating their own downward momentum as inventories climbed higher, even as other fuel prices started rising in December. Technically speaking, ethanol prices remain in a downtrend, but are nearing possible support at the nine-month low of $2.13 a gallon. The weekly stochastic has not yet turned higher, but bears watching for a possible change in downward momentum.

March crude oil closed up $1.84 last week at $85.14, near the highest spot price in seven years. Crude oil prices have seen a quick turnaround since early December when the March contract fell to $62.05. The quick drop after Thanksgiving was related to the emergence of the omicron variant and how it could slow world oil demand. The rebound largely occurred as it became apparent the West and Russia were at odds over the presence of Russian troops on Ukraine's border and neither side was budging. The possible threat Russia could withhold energy supplies has pushed oil prices to their highest level since 2014. Technically speaking, March crude oil prices have been on the rise since April 2020 and the current trend is up in a potentially volatile situation. However, the weekly chart is setting up for possible bearish divergence on the stochastics indicator, a warning signal to watch for.

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

Todd Hultman can be reached at Todd.Hultman@dtn.com

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