With crude oil prices in the dumper, ethanol now economically unfeasible and demand for commodities down across the board, corn prices have simply collapsed in early December from a high of $7.75 per bushel in late June.
“This market has to find more demand,” says Shawn McCambridge, senior analyst for Prudential Bache Commodities LLC. “Right now the best support is lack of selling interest,” and the only good news is that diminishing ethanol and export demand will allow depleted supplies to rebuild. Barring a meltdown in the financials, he says the Dec. 5 low of $3.055 in March corn should serve as an interim bottom. Near-term upside potential is between $3.50 and $3.75 based on short covering.
Jim Bower, of Bower Trading, will soon turn his attention to the Southern Hemisphere. He says that due to recently high energy and fertilizer costs, the credit freeze and worldwide economic slowdown, farmers in Brazil and Argentina have reduced their usage of fertilizer, which will support prices and lessen yields by as much as 500,000 metric tons. “They were making purchases at the worst possible time,” he says. In January, corn typically sells off for tax purposes before rebounding, he says, but it likely will continue to trade between $3.15 and $3.50. “Based on the price on Dec. 5, I don’t want to be short anything that grows.”