Corn can make another notch on its wall as its major (long-term) downtrend lasted through another month. The move that started in August 2012 following the establishment of the high at $8.43 3/4 has now reached 15 months long as the nearby contract posted a new low of $4.10 3/4 in November. The last time the corn market was priced this low was back in August 2010 (top chart, dashed red line).
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A look at the long-term monthly chart gives market bulls few reasons to believe corn is going to turn any time soon. Next major support is at the previous low of $2.96 3/4 (from September 2009). Monthly stochastics (second study) have moved into an oversold position below 20%, but appear to be a number of months away from establishing a bullish crossover.
Fundamentally the market seems to have stabilized, with the carry in the nearby futures spread (third study, green line) holding at a neutral level. The 9 1/4 cent carry in the December to March spread amounts to approximately 51% of the full cost of carry, with bearish being anything greater than roughly 66% and bullish anything less than about 33%. It should be noted that if the trend in the nearby spread continues to move sideways, and the trend in the futures market remains down, the percent of total cost of carry will increase reflecting a more bearish commercial outlook.
But there are a few bullish factors as well. The month of November saw noncommercial traders (according to weekly CFTC Commitments of Traders reports) trim their net-short futures position (bottom study, blue histogram) 115,220 contracts at the end of October to just under 70,500 contracts in late-November. With the March contract priced near the lower-third of the 5-year price distribution range, this group could view the market as underpriced and continue to cover (buy back short futures).
One last thing, the 5-year seasonal index for corn shows that both futures and cash (DTN National Corn Index) tend to post a low the close of the first week of December, next week. From their both markets embark on an uptrend that tends to last through the spring. We'll see if the seasonal tendency can trump the major trend this year.
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