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Corn Price Jump after Steep Downward Movement

Sean Brown

What the Latest USDA Export Inspection Report Just Did for Grains

(Continued from Prior Part)

Trends in corn prices

Corn prices for March 2016 increased on February 16, 2016, and were trading near the support level of 365 cents per bushel at the end of the day. Prices opened strong that day—above the support of 360 cents—and continued to rise as price anticipations changed from a downward channel to range-bound movements in the near term. This caused volumes to increase by about 10.7% and open interest to drop sharply by 5.03% on February 17. Still, despite the rise, prices continued to trade below the 20-day moving average of 366 cents per bushel that day.

The graph above indicates that corn prices could remain in the range of 358–368 cents per bushel in the near term.

Price drivers

The speculation of strong corn demand due to delays in Brazilian shipments reflected from the USDA’s weekly export inspection report supported prices on February 16. But favorable weather conditions and the anticipation of increased production from both Brazil and Argentina suggest that competition will ramp up. Meanwhile, the US dollar appreciated by 0.96% on February 16, and this hurt US export sentiments, including corn prices, that day.

Stocks review

Corn prices have a direct positive relationship with corn-producing companies. Archer Daniel Midlands (ADM), Tyson Foods (TSN) and Bunge (BG) rose by 3.6%, and 2.7%, 1.3%, respectively, for the second consecutive trading day on February 16. Over the two-day period, these companies rose by 6.3%, 2.97%, and 8.6%, respectively.

After three consecutive trading days of declines—by 5.7% over a three-day period—Ingredion (INGR) increased by 1.5% with the brief rise in corn prices on February 16. The PowerShares DB Agriculture Fund (DBA) continued its rising movement for the second straight day, increasing by 0.81% on February 16, 2016, and by 1.2% over that two-day period.

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