Above is a weekly continuation chart for Corn. 2008/2009 saw a spike up above $8.00. In 2010 we began a 3 year rally up culminating with Summer 2012 peaking above $8.00 again.
In my opinion, many of the factors which were present between 2010 and now are now dissipated. Gone is the fear of rampant inflation. We saw huge influx of outside fund money as money poured into the market. Gold rallied and in general the commodity as a hedge for inflation sales pitch was rampantly considered “prudent”. In the summer of 2012, I had the pleasure of running into a 20 something young man who happened to be working with and Ethanol firm, hedging their inputs.
All I remember about our conversation, which, coincidentally ended around 4AM at a Rush St. tavern which shall remain nameless, was that I gave him my card and told him I would gladly line up producers giving him $7.50 cash corn for the next 24 months. He was absolutely convinced that the dynamics of ethanol, oil and corn would lead to $8.00 corn being the new norm.
He was so adamant and coincidentally, obnoxious in his adamant view that “their computer models, blah, blah, blah.. I left that encounter more convinced than ever that corn was within 3 months of its high tick.
I wasn’t sure if that high tick was going to be $7.50 or $12.50. I just felt that his level of hysterical bullishness, combined with the fact that he was born after 1990, made me extremely suspect.
With that as a back ground, we look ahead for potential prices for 2014 corn. My opinion is that there will be one more flush in CH, down to the $4.00 print. I don’t see how a market with a life of contract high at $6.70, posted back in September of 2012, would melt to a contact low of $4.18, (a $2.52 cent swing) or 38 % of its value. Why it would come down to $4.18 and not bother to go get that $4.00 print doesn’t seem logical.
For that reason, I am looking for that $4.00 print to come some time after the first of the year. Coincidentally, we have a big USDA report Friday Jan 10th. That calendar date is a key one to remember for the grains in general and for corn and beans in particular.
Above is a weekly life of contract chart for CH14. Trend is down. CH would have to rally above$5.50 to switch the intermediate trend back to neutral from bearish. Any trend following system would have you short now. Coincidentally, the speculative managed funds remain net short.
CER