Corn Price Resistance Could Be Building

CBOT corn futures closed higher for the second straight day as fundamental factors strengthened, yet some technical indicators urge caution about the extent of a rally.

Since setting a new contract low of $3.46 a bushel on July 6, the most-active Dec corn contract has risen to Wednesday’s high of $3.75 ½, a gain of $0.29 ½, or 8.53%, in just one week.

Currently, the markets are following weather reports that call for a high pressure ridge over the Midwest bringing scorching temperatures at a time when many fields are trying to pollinate.  The consensus is that yields will be harmed and supplies will be lower than forecasts.

The USDA’s World Agricultural Supply and Demand Estimates report Tuesday estimated 2016-17 crop year corn production at 14.540 billion bushels, up 11.0 million, or 0.76%, from its estimate of 14.430 billion in June.

Ending stocks were estimated at 14.200 billion bushels, up 30 million, or 0.21%, from June’s 14.170 billion.




While a look at a bar chart of daily price moves would seem to indicate that prices could go up even more to make up for the steep price drop of the previous two weeks now that a gap on these charts that was opened on July 5.

Price gaps act like magnets – they both attract and repel.  The market wants to fill them, but attempts to do so sometimes seem like trying to jog through deep snow.  But once filled, prices seem freer to continue moving in that direction.  In this case, that’s up.

However, Fibonacci retracement points will become stronger resistance the higher prices go.  In the case of the Dec contract, the 23.6% retracement of the June 17-to-July 6 drop is about $3.69 a bushel.  More resistance shows up at the 38.2% level around $3.85.  Fifty-percent retracement is near $3.97.

Bollinger bands, a kind of trading envelope based on moving averages, are beginning to narrow as the upper line drops and the lower line begins to turn sideways.  A wide gap shows high market volatility while a narrow gap shows low volatility.

Dec closed above the 10-day moving average on Wednesday and traders may have their sights set on the 20-day line, which crosses at $3.88 ¾, between the 23.6% and 38.2% retracement points.  The 50-day average crosses at $4.00 ¼, and the 100-day line is at $3.91 3/4.

Technical traders will be watching for price resistance at the cluster of moving averages and retracement points.




No cash cattle trade was reported Wednesday after scattered action Tuesday at $188 per cwt on a dressed basis in Nebraska, $3 lower than last week but too few to establish a trend.  On a live basis, bids were at $116, but asking prices were firm at $120 to $122.

Cash markets last week were about $2 per cwt lower live at mostly $120 with some at $120.50 in Nebraska.  Dressed basis were about $3 to $4 lower at $191 to $192.

The USDA’s choice cutout Wednesday was $1.19 per cwt lower at $205.19, while select was off $0.53 at $195.51.  The choice/select spread narrowed to $9.68 from $10.34 with 102 loads of fabricated product sold into the spot market.

The CME Feeder Cattle Index for the seven days ended Tuesday was $144.72 per cwt, down $0.53.  This compares with the Aug settlement Wednesday of $139.27, up $0.67.