U.S. Markets closed

Corn Breached the Crucial Support Level: What Does It Mean?

Sean Brown

Why Did Weekly Export Sales Influence Grain Prices?

(Continued from Prior Part)

Trend in corn prices

Corn prices for March 2016 expiry were trading near the support of $3.55 per bushel on February 25, 2016. The prices shifted to the downward channel. Prices fell for the third consecutive trading day by 3.3%. Prices fell below the crucial support of $3.60 per bushel. It could test the support of $3.55 and $3.50 in near term. The volume fell by 10.3%. The open interest fell by 26.9% on February 25, 2016. Prices continued to trade below the major simple moving averages on February 25.

The above chart shows that prices could be $3.50–$3.65 per bushel in the near term.

Price drivers

The weaker-than-expected corn export report from the U.S. Department of Agriculture hurt corn prices on February 25, 2016. Stronger Brazilian output from the harvest progress and Safrinha corn plantings increased the fear of the export competition on the day. Estimates from the International Grains Council for the global corn production for 2015–2016 were stronger than expected. It hurt the prospects of US corn exports on February 25, 2016.

However, the US dollar depreciated by 0.05% on February 25, 2016. It supported the export sentiments. The lower US dollar favors US goods in the export market.

Stocks review

The fall in corn prices isn’t favorable for the shares of companies in the corn trading and producing business. Companies like CHS (CHSCP) fell by 0.20% for the second consecutive trading day on February 25, 2016, with the fall in corn prices. However, the shares of Archer Daniels Midland (ADM) and Ingredion (INGR) rose by 2.3% and 0.98% for the second consecutive trading day on February 25, 2016. These shares rose by 2.5% and 1.8% during the previous two days. Tyson Foods (TSN) rose by 1.6%. It continued the upward movement for the sixth consecutive trading day. During the period, it rose by 1.9%. The PowerShares DB Agriculture Fund (DBA) fell by 0.15% after rising for three consecutive days by 1.3% on February 25, 2016, due to the fall in corn prices.

Continue to Next Part

Browse this series on Market Realist: