Technically Speaking

On Monday, Dec. 18, U.S. Customs closed two rail lines into Mexico and it didn't take long for corn traders to realize how disastrous the closures could quickly become for both sides of the border, if kept in place for long. Mexico livestock producers have been this season's largest buyers of U.S. corn and it's been good for the U.S. to have a customer that didn't require transit through the drought-restricted Panama Canal.

Looking at the chart, March corn lost 6 of the week's 10 cents on Monday, hitting a new low of $4.68 1/4 Wednesday before ending at $4.73 Friday, the day U.S. Customs announced the rail lines would open again. Corn prices remain in a gradual downtrend since harvest, unable to even challenge the 100-day average at $4.94. The temporary lack of rail service to Mexico didn't help matters for corn prices, already dealing with increased supplies in 2023-24. Commercials have shown more buying interest in corn prices below $5.00 and there is reason for March corn to have technical support near $4.50, but so far, there has been no technical sign of reversal.

March soybean meal prices were also negatively impacted by last week's rail closures, but showed a different response to the week's events, helped by a more bullish fundamental context. Unlike corn, U.S. supplies of soybean meal are tighter than they were a year ago and cash meal prices in the U.S. are trading above the futures board, a sign of strong demand. March soybean meal traded higher the first day of the rail closures but fell $9.00 the next day as the importance of meal shipments to Mexico received more appreciation. A higher close in response to Friday's reopening announcement helped cut March soybean meal's loss on the week to $5.50, ending at $391.10 a ton.

Technically, March soybean meal traded at a new two-month low of $384.70 and ended the week below the 100-day average at $396.00 but is still well above the October low near $365.00. Officially, the trend is bearish after this week's rail closures, but given the announced reopening and the more bullish fundamental context for meal, the market is ripe for a bullish reversal as long as prices stay above $365.00.

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.

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

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