Fundamentally, with all the talk of trend following funds holding a record net short position in corn, it would seem that the market could be poised to make a push higher. Although for now, the corn market continues to remain range bound.
Wheat finished higher Monday supported by concerns we could see some lost production in the coming days as cold temperatures are set to hit parts of the plains and with a huge amount of the U.S. wheat crop out of dormancy because of early season heat we likely could see a reduction in yield if these temperatures are very widespread.
Wheat’s last bear market ended in 2009 with a final blow off to the downside in 2010. Both times it definitely did not like staying under 450. It would quickly recover back over that price level the same month. We are seeing that same similarity again this year. But it doesn’t end there.
Funds short covering Sunday night was not enough to hold during Monday’s day session as we sold off the highs once again. In the overnight electronic session, May corn is currently trading at 357 ¾ which is 1 ¼ of a cent lower.
We ended the month of February with many of our agricultural markets at or near six-year lows. In most cases our move to these levels has been gradual. In fact, soybean futures just logged their narrowest monthly trading range in a decade. Implied volatility has responded in kind with soybean, wheat and corn volatility all trading at multi-year lows.
World wheat production still sits at record levels and stocks remain at their highest number ever. Our price outlooks do look for a rebound of July wheat to test the five dollar level at some point in the spring but right now we do not have the fundamental or technical indication the market will reach to higher levels.