Corn market faces pressure, analyst says

Increasing harvest in Brazil may spark increased selling.

The corn market has closed higher in three of the past four trading sessions, but it still looks vulnerable to increased selling pressure if speculators make a move to lighten up on their hefty net long position.

While drier weather in Brazil (especially the southern part) this week will help boost harvest activity, traders see the two-week outlook for very little rain in Argentina as somewhat supportive. There are some concerns about soil moisture in provinces such as Cordoba, Santa Fe and Buenos Aires, as there is no rain forecast for the coming weeks.

A Reuters poll shows an average trade estimate for this year’s U.S. corn planted area of 92.9 million acres with estimates ranging from 91.5-94.7 million, versus 90.8 million last year.

The corn market managed to rally on Wednesday despite a sharp rally in the U.S. dollar and weakness in gold and the stock market. Further strength in the energy complex may have lent support.

Winter corn planting was 11% complete in Brazil as of February 11, down from a five-year average of 31%, according to AgRural. The technical setup in the corn market is still bearish, with a sweeping key reversal on February 9, a weekly key reversal for the week ending February 12, a stochastic crossover from near 82, and major RSI divergence that points to a loss of momentum.

The market is still overbought basis the COT report, and it could see increased selling if support levels Are violated. The large and small speculator combined net long position is 504,006 contracts, just short of the record 531,098.

MARKET IDEAS

The corn market remains vulnerable to increased selling from speculators, if support levels are violated. Resistance for the May corn futures contract comes in at $5.53 1/4, with $5.13 and $5.05 1/2 as next support.

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