Grain Spreads: Sell the Fact in Corn

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Commentary

USDA cut its corn crop estimate 62 million bushels from the September report. The average yield declined 0.7 bu. to 186.0 bushels per acre, though still 6.7 bu. above last year’s record. Harvested area was unchanged at 90.047 million acres. The 186 US national yield was made up of increased yields in IL, IN, SD, & KS. In IA, MN, MO yields were lower according to the USDA. Overall, the report can be considered slightly bearish in my opinion. USDA pegged ending corn stocks at 2.154 billion bushels. However, USDA noted that the available data for this report was limited by the shutdown, suggesting additional changes will occur in the December or January report. Following yesterday's technical breakout to the upside, support is likely on a pullback in my view, but where? A fifty percent retracement from then August lows to this week’s high is the 417/18 area. Initial support next week is the 50-day moving average is the 424 area. Resistance ix at 4.35 and then 4.40. Technically a weekly bearish close in my view as the price action this week was buy the rumor and sell the fact. Supply outpaces demand for now regarding corn and we will see if the calendar spreads like Dec25/March 26 or March 26/May 26 weakens to offer us any clues moving forward. 

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Sean Lusk

Vice President Commercial Hedging Division

Walsh Trading

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