Ag hedge: Corn, China and the USDA

March 29, 2016 09:51 AM

Ahead of the USDA report this week, China will let the market dictate corn prices.

Fundamentally, China is one of the world's largest corn producers, producing roughly 220 million metric tons per year. It's being reported by the official Xinhua News Agency that the communist regime will end the stockpiling of corn and let the market dictate prices. This after about eight years of growing and storing corn to the point where there is a glut. 

We also have the USDA report later this week on Thursday, March 30. This report will show us the prospective plantings as well as grain stocks as we head into this years planting season. The last several reports have yet to have a real lasting effect on prices as we continue to remain sub $4/bushel in CBOT Corn.  

Technically, my support area in corn has held to my satisfaction. My major support area in the corn market is $3.50/bushel. It's a small victory for each day the market stays above this support. I have added my favorite technical indicators to the charts below. I have coined them the "10/20/50/BB Trend Finder." They are the 10- (red line), 20- (green line, and the 50- (blue line) day simple moving averages (SMA). I have also added Bollinger Bands or BB's (light blue shaded area) and candlesticks (the red and green bars with the candle stick wicks, and on this daily chart each bar represents one day of trading). 

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About the Author

Matt McKinney is a full-service options broker at Zaner Group both buying and selling energies, metals, grains, softs, currencies and the 30-year bond market. My strategies include time frames of 45-120 days with the ability to liquidate at any time. I can be reached at mmckinney@zaner.com.

Whether you're a novice trader who wants to participate in options on futures or an experienced trader, you can also check out my blog at http://www.mmckinneyfutures.com/.