Corn’s ups and downs

COT Data

Now taking a deep look into “big money,” what do we see? Looking at the spreadsheet below we see the in the old COT Legacy report commercials are now at a 52-week high with a net-short position of -207,505 contracts. For the more transparent view, looking at the weekly chart below we see that Producers (true commercials) back on Sept. 2 were -500,010 contracts net-short, Managed Money was 294,247 net-long and Swap Dealers were 209,516 net-long. Move ahead to this past Friday and we see the Producers dropped to -380,767 contracts net-short, Managed money dropped to 211,766 contracts net-long, and Swap Dealers dropped to 173,262 contracts net-long. Could this large liquidation have anything to do with this month’s corn dive? What do you think?

In this past Friday’s Grain Stocks report released by the USDA, we saw corn stocks down 34% from September 2010. Soybean stocks up 42% from September 2010, and all wheat stocks were down 12%. While this report is bullish corn, this past month you would rather be right the charts and wrong fundamentals. If you are right fundamentals and wrong the charts, you know what is going to happen.

Commercial Net Tracker instructions: This form tracks the Commitment of Traders (COT) data for the commodity futures market. This form "looks" at the most recent five weeks of COT data and provides visual indications of the data. A) If the current value is at a 12-month low, the cell will display a red/burgundy background. B) If the current value is at a 12-month high, the cell will display a green background. C) If the current value went from net negative to net positive, the cell will display a blue background (indicating a bullish condition). D) If the current value is both a 12-month high and also went from a net negative to a net positive, the background will be green. You should view the data with green backgrounds to determine if they also went from net negative to net positive.

If you need help understanding how to understand how to use the COT report to your benefit, please email me at Gary@crbtrader.com and put COT report in the subject line. Please include your name and telephone number in the email.

Proceed to Page 3 for this week's detailed fundementals charts...

Fundamentals

Corn prices fell to a three-month low on concerns that a slowing economy will curb demand for commodities. Other bearish factors include:

1. Recent dollar strength
2. The statement from the Ag Ministry of Argentina, the world’s second-largest corn exporter, that 2011/12 corn plantings will rise +7.2% y/y to 12 million acres
3. The USDA’s Sept. 12 cut in its U.S. corn export forecast to a 13-year low of 1.65 billion bushels
4. Reduced corn demand by livestock producers that left quarterly U.S. corn inventories on June 1 at 3.67 billion bushels, higher than estimates of 3.29 billion bushels

Bullish factors include:

1. Increased Chinese demand after inspections of U.S. corn exports to China nearly doubled to 7.187 million bushels in the week ended Sept. 22 from a year earlier
2. 52% of the U.S. corn crop in good-to-excellent condition as of Sept. 25, the worst preharvest condition in eight years
3. The USDA’s Sept. 12 cut in its U.S. corn production estimate for this year to 12.497 billion bushels from an August estimate of 12.914 billion as it cut its yield estimate to a five-year low of 148.1 bushels per acre
4. The USDA’s Sept. 12 cut in its 2011-12 US carryover estimate to a 15-year low of 672 million bushel
5. IGC’s prediction that global corn inventories will fall to 111 MMT in 2011/12, or about 13% of consumption, the smallest stocks-to-use ratio since 1974.

Weekly corn exports (week ended Sept. 22): 823.1 MT; 2011/12 (September-August) cumulative exports –38% y/y.

Fundamental outlook — Bull market correction — Corn prices weakened further as most commodities slumped on demand concerns. On the bullish side, the corn supply situation remains very tight with the U.S. carry-over estimate at a 15-year low. The corn 2011-12 stocks/use ratios are very tight with the United States at 5.3% and the world at 13.6%.

Have a prosperous trading week.

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