Ag Update: Has Corn Finally Bottomed?
Ag investors received a boatload of important information over the past few days. As you may know, the most recent USDA World Agricultural Supply and Demand Estimate (WASDE) report came out on November 8th.
Let’s dig in and see what this essential data tells us about the price of corn and wheat…
CORN
Corn bulls finally got a breath of fresh air from the WASDE report. In what would usually be perceived as bearish information, the USDA raised its 2013/2014 world corn ending stocks estimate to 1.887 billion bushels.
However, the estimate was far weaker than the 2.0 billion bushels investors expected…
As a result, the price of corn rose from $4.15 a bushel up to $4.37 a bushel in the days following the report.
But that’s not all…
Strengthening demand has the potential to push corn prices even higher over the next six months. In case you’re unaware, this summer’s remarkable wipeout in prices is making the yellow grain the most affordable in years. As a result, global corn consumers are jumping at the opportunity to shore up inventories while prices are low.
And to add even more fuel to the bullish fire…
Corn is one of the most highly shorted commodities in the marketplace right now. Many hedge funds still believe a record US crop will send corn prices below $4.00 a bushel in the not so distant future.
But thanks to this week’s bullish WASDE information, there’s a growing possibility of a short squeeze in the corn futures market.
WHEAT
Wheat bulls didn’t fare nearly as well in recent trading…
The USDA raised projected 2013/2014 US wheat supplies by 26 million bushels. As a result, US ending stocks for the essential grain jumped to 565 million bushels. That’s much stronger than the 529 million bushels expected by investors.
Wheat fell from $6.58 a bushel on the morning of the WASDE report to a low of $6.44 in yesterday’s trading session.
Adding additional downside pressure to the grain is the fact US exports weren’t expected to grow as much as many investors thought. As a matter of fact, the USDA unexpectedly cut Chinese wheat import estimates by 1 million tonnes.
And oddly enough, the government agency didn’t foresee a weak Argentinian wheat crop increasing US exports going forward.
As you may remember from an earlier article, an early freeze has Argentina’s wheat crop on the ropes. That has the country’s northern neighbor, Brazil, coming to the US for supplies of the commodity.
Some analysts see the snub of the Argentinian situation as a mistake by the USDA…
So while it looks as though wheat may test the August lows near $6.30 a bushel, it may be the opportune time for long-term bulls to pick up the grain on the cheap.
Bottom line…
From a distance, corn and wheat fundamentals still look overwhelmingly bearish. But when you dig into the details, recent fundamental changes increase the odds of a bottom being put into these markets.
If you’d like to capitalize on this potential profit situation in grains, the Teucrium Corn Fund (CORN) and Teucrium Wheat Fund (WEAT) are efficient ways to invest in these markets.
Stay tuned to Commodity Trading Research for continued insight on the grain markets!
Until Next Time,
Justin Bennett
Category: Commodities
