CBOT weekly outlook: December corn seen as bellwether

CNS Canada — As traders wait for the U.S. Department of Agriculture to put out fresh acreage estimates for corn and soybeans this week some eyes have already shifted to the behaviour of certain deferred contracts in the market.

“If the December (corn) contract broke above US$4 (a bushel) it would be a catalyst,” said Scott Capinegro of HighGround Trading Group in Chicago.

That’s the point at which many producers expect to make money on December corn, he said. As the close on Wednesday, the contract was trading at $3.9725 on the Chicago Board of Trade (all figures US$).

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“Whether they’re going do a little bit of hedging up at that ($4) mark, it’s hard to say,” he said. “We may need some weather problems or something going on.”

Both the March and May corn contracts finished 7.75 cents lower during the week ended Wednesday.

USDA’s 93rd annual Agricultural Outlook Forum is being held Thursday and Friday in Arlington, Va., at which acreage estimates are expected to be released.

While some have speculated U.S. corn acreage could be as low as 90.5 million acres, Capinegro is more optimistic.

“I’m more in the 91 and a half to 92 (million acres) area right now,” he said.

However, he noted, farmers tend to plant more corn whenever there is an early spring, so those estimates could change again.

The week was a volatile one in soybeans, for both the March contract and the dominant May contract.

Capinegro expects a lot of money to flow in corn and soybean contracts over the next few days as March options are set to expire on Friday. As well, he said, many expect soybean acres to grow at the expense of corn in USDA’s acreage estimates.

“The March (soybean) contract is trading at $10.26; are we going to $10.20 because of the options (expiry) on Friday?” he asked. “I’d be shocked, though, if we beat the February low of $10.17.”

It’s hard to see any rallies taking place in the next little while, Capinegro said, given the lack of major weather concerns in South America.

“All the funds are long too, which is another red flag,” he said.

He pegs hard floor support for the most-active May contract at $10.12 a bushel.

One item still monitored closely is the currency fluctuations between the U.S. dollar and Brazilian real.

However, he noted, politics could also move the market going forward. “In terms of our political situation, Trump hasn’t even started on China yet.”

— Dave Sims writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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