What USDA report tells us about corn: Short- and long-term

Immediately after Monday's USDA supply/demand report, corn futures hit a four-month high. The high for the March corn futures was $4.49 per bushel. It didn't stay there long and ended up settling at $4.43. The market looked even weaker today, with a high on the March of $4.44, a low of $4.37, and it closed at $4.41. No follow through whatsoever.

Even while the USDA said corn shipments to overseas buyers will total 1.6 billion bushels in the 2013-14 season, up from last month's export projection of 1.45 billion bushels, we saw no follow through to the upside on Tuesday Feb. 11. Maybe that could be because currently we have, according to Hightower Reports, "...1.7 million tons of unshipped corn on the books with China and that leaves a lot of risk for cancellations."

Are they not held to their commitments? It seems like every time you turn around Hedge Brokers are talking about another Chinese order cancellation-whether it's beans or corn.

It's tough, China is our number one customer for grains, but there should be rules. If you book an order, like anything else in life, a deposit should be taken as earnest money to lock in the price and the remainder should be paid upon delivery. That is just business.

Fundamentally, it's hard to rely on these orders and these USDA reports when no one is held accountable. But hey as I once heard a great one say, "These are the numbers we have to trade, so let' trade them."

I have added some of my favorite technical indicators to a daily March corn chart (below). They are the 9-, 20-, and 50-day simple moving averages (SMA), Bollinger bands (light blue shaded area), candlesticks, and volume. I like these indicators because they can tell me dozens of important items and they can do this on any time frame and any market.

The very first item I notice here is that heading into this USDA report we have seen a market that is in what I have coined a super-trend up. This happens when the 9-day SMA (red line) crosses up and over the 20-day SMA (green line) as both indicators simultaneously point upward as the market itself trades above the 9-day SMA (red line). The cross of the 9-day SMA up and over the 20-day SMA occurred on Jan. 22, but the super-trend up wasn't in full force until around Jan. 30. At that point both the 9- and 20-day SMA's were pointing upward on strong angles never breaching the support of the 9-day SMA (red line) moving along in a super-trend up.

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