Continued heavy rains throughout the Midwest are causing nervous bears to run for the hills. Traders are concerned that continued rainy weather will cause a delay in planting, pushing the timing for pollination of the crop more towards the hot part of late July and August. This typically will cause reduced yields and lower supplies, not a good thing when skyrocketing food prices are making daily headlines.
On Monday new crop December Corn futures (CZ) closed at a new record. However, the old crop July contract closed more than 8¢ off its high. Usually, bull markets are led by the front month contract, so we have to ask: Is the failure of July to lead a bearish signal?
Q: What has happened when, during April, the December Corn contract closes at a new three-month high, but the July contract (CN) finishes more than 5¢ off its high close?
A: The results have been typically bearish with the July contract falling up to 90% of the time in the four weeks following the event. The December contact has also fallen, but not as much as the July contract.
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Robert J. O'Brien Jr. is President of County Cork, LLC, a Commodity Trading Advisor (CTA) based in Skokie, Illinois.
