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What Caused Corn Prices to Fall for the Second Consecutive Day?

Sean Brown

Why Projections for Marketing Year 2016–2017 Drove Grain Prices

(Continued from Prior Part)

Trend in corn prices

Corn futures prices for March contracts were trading near the support level of $3.60 per bushel on February 24, 2016. Corn prices fell for the second consecutive trading day. As a result, corn prices reached the projected price range expectations. Prices could test the support near $3.55 per bushel in the near term. The volume rose by 35.2% on February 24. The open interest fell by 15.2%. The first notice day is just after the weekend. Prices were below the 20-day, 50-day, and 100-day moving averages. They’re expected to remain in this direction.

The above chart indicates that prices could be $3.55–$3.70 per bushel in the near term.

Price drivers

The stronger-than-expected rise in corn planting acres for marketing year 2016–2017 hurt corn futures prices on February 24, 2016. The US dollar appreciated by 0.03% on February 24. It hurt the export sentiment on the day.

Indications of rising ethanol demand supported corn prices from the U.S. Energy Information Administration’s weekly reports. South Africa’s National Treasury announced an increase in corn imports. This supported the prospects for US corn exports.

Stocks review

There’s a positive correlation between fertilizer businesses and corn prices. Lower corn prices lead to low profitability for fertilizer companies. On February 24, with the decline in corn prices, the shares of Syngenta (SYT) and Terra Nitrogen (TNH) fell for the fifth and fourth consecutive trading day by 0.49% and 0.84%. These shares lost 1.9% and 8.7% during the period. However, the share values of Potash Corporation (POT) and The Mosaic Company (MOS) rose by 3.9% and 2.4% on February 24, 2016. These shares recovered from the previous day’s fall of 0.99% and 3.1% on the day. The PowerShares DB Agriculture Fund (DBA) continued to advance for the third consecutive trading day by 0.25% on February 24. It rose by 1.3% during the period.

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