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Competition Speculation Pushes Corn toward Crucial Support Level

Sean Brown

Grain Prices Tumble due to Favorable Weather Projections

(Continued from Prior Part)

Trend for corn prices

Corn futures contracts for March delivery fell for the sixth consecutive trading day on February 10, 2016. Prices continued their downward path, but technical support above 360 cents per bushel supported prices.

Volume dropped by 46.4%, and open interest fell by 3.3% on February 10, 2016. Prices continue to retreat from the key 20-day, 50-day, and 100-day moving averages of 366, 367, and 376 cents, respectively. Prices are expected to show strength in the coming days.

The chart above indicates that prices could remain in the range of 355–365 cents per bushel in the near term.

Price drivers

The EIA’s strong Weekly Ethanol Plant Production and Weekly US Ending Stocks of Fuel Ethanol reports dragged corn prices down. Favorable weather conditions in Argentina are projected to increase corn production and export competition for US corn. The speculation of higher export competition for US corn pushed prices down on February 10, 2016.

However, the US dollar continued to depreciate by 0.21% on February 10, 2016, supporting corn export sentiments.

Stock review

The slide in corn prices negatively affects corn trading and producing companies, as it reduces inventory value. On February 10, Archer Daniels Midland (ADM) fell, continuing its downward movement, which had been hindered by the previous day’s rise of 0.84%.

After three consecutive days of rising, Ingredion (INGR) fell by 2.6% on February 10. In contrast, ConAgra Foods (CAG) rose by 1.4% for the second straight trading day on February 10. Campbell Soup Company (CPB) rose by 1.2% on the day, continuing its rising price movement for the fifth consecutive trading day.

The ETF PowerShares DB Agriculture ETF (DBA) rose by 0.05% on February 10, after four consecutive days of falling prices.

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