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Why Did Corn Prices Fall to the Projected Price Range?

Sean Brown

South American Supply Speculations: How Did They Impact Grains?

(Continued from Prior Part)

Trend for corn prices

March corn contracts were near the key support of $3.60 per bushel at the end of the day on February 23, 2016. The fall in corn prices is expected to keep corn in the projected development range. The volume fell by 45.5%. The open interest fell by 17.2% for the third consecutive trading day. Failure of the technical short covering hurt corn prices on February 23, 2016. Prices lost the support of $3.65. Corn traded below the 20-day, 50-day, and 100-day moving averages of $3.66, $3.65, and $3.74 per bushel on February 23, 2016.

The above chart suggests that corn prices could be $3.60–$3.70 per bushel in the near term.

Price drivers

Higher corn production prospects from major corn producing countries such as Ukraine, Brazil, and Argentina negatively affected the US corn export sentiment with greater competition on February 23, 2016. Favorable weather conditions in Brazil and a supportive weather forecast in the near term are expected to support the output. Speculation of stronger Brazilian supplies hurt US corn prices on February 23.

The US dollar appreciated by 0.04% for the second consecutive trading day on February 23. It hurt US goods, like corn, in the export market.

Stocks review

Downward movement in corn drags down farm incomes and hurts fertilizer businesses. Companies such as Terra Nitrogen (TNH) fell for the third consecutive trading day by 0.62% on February 23, 2016. It fell by 8% when corn prices fell for three days. The Mosaic Company (MOS) and Monsanto (MON) fell by 3.1% and 1.7% on February 23, 2016, with the fall in corn prices. Shares of these companies nearly leveled the losses of the previous day. Intrepid Potash (IPI) fell by 7.0% on February 23, 2016. It recovered from the rise of 3.9% the day before. The PowerShares DB Agriculture Fund (DBA) rose for the second consecutive trading day by 0.25% on February 23, 2016, with the fall in corn prices. It rose by 1.1% during the period.

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