Corn still markets’ top grain
Corn still markets’ top grain
Analyst:?May test $8 in ’12
Farm News staff writer
The corn market may test 2011’s highs again in the coming months, according to a DTN market analyst, who noted that corn is still king of the grain markets right now.
“Long-term, I think corn still has another run it in, and we could test the $8 range again,” said Darin Newsom, a senior analyst with DTN. “Traders are still concerned about having enough supplies to meet demand.”
The sell-off in corn in September wasn’t that surprising, Newsom said, especially with all the volatility in the market. Despite lower prices in recent weeks, the market fundamentals for corn remain strong.
“We’re in the second tightest supply-demand situation on record, surpassed only by 1995-96,” said Newsom, who noted that many unknowns still exist, since there are no final harvest numbers yet.
“We’ve seen the market pull back to $5.50, which should be about as far as this market goes.”
Corn will continue to drive the direction of the grain markets in the weeks ahead, Newsom said, who noted that corn has the most bullish structure long-term, compared to soybeans or wheat.
Holding corn may pay off for producers. “The strength of the cash market versus the futures market could make owning cash corn a more profitable long-term situation.”
Watching the dollar
While the general trend in commodities is down, heading into the fourth quarter of 2011, Newsom said, volatility will continue to impact all commodity markets. The U.S. dollar is a key factor to watch.
While the dollar tends to move in a direction opposite of the Dow Jones Industrial Average, commodities usually trade in step with the Dow, which continues to be under pressure and faces some bearish signals that cannot be ignored.
“To me, the dollar has broken to the upside,” said Newsom, who noted that the fourth quarter appears to be neutral to a bit bullish for the U.S. dollar.
“There’s no fundamental reason for the dollar to rally. If it happens, it will have to come from the investment side.”
Heating oil, diesel
It’s also useful to keep an eye on the energy markets in the fourth quarter, Newsom said.
While current stocks of crude oil are lower, compared to 2010, they are still high for the five-year average.
Newsom noted that crude oil is not his first choice for a bullish market, since the fundamentals remain bearish heading into the fourth quarter.
Gasoline could have a more bullish fourth quarter this year than normal, Newsom
added. “While gasoline stocks are building and are running well over the five-year average, the
market doesn’t seem to agree with the government’s numbers. The market believes that supplies
are tighter.” Still, the market may have difficulty overcoming the bearish seasonal index, which
shows a continued sell-off into mid February, Newsom said.
The heating oil market, which includes all the distillates and diesel fuel, is even more
bullish than gasoline. “Money wants to come into this market,” said Newsom, who noted that
this market exhibits a bullish supply-and-demand situation.
Investors move away from gold
In the metals market, gold has attracted a lot of attention in the past year, although it
doesn’t have a bullish structure right now.
“Gold is losing its luster,” said Newsom, who expects this market to trade sideways or
lower in the fourth quarter. “It’s a market that people will probably step out of as they look to put
their money in other commodities.”
Ag commodities offer opportunities
Globally, many commodities remain bullish, added Newsom, who noted that individual
commodities, including corn, should offer good trading opportunities in the months ahead. “I
think the corn market can gain momentum, which will pull in more investment money.”
The key is to look for markets with a bullish structure in the trends, which reflect the flow
of money, and the spreads, which are the underlying market fundamentals, Newsom said. “The
more bullish commodities in the ag sector, where global supply and demand remains an issue.
Watch for ways to take advantage of these opportunities in the fourth quarter.”
You can contact Darcy Dougherty Maulsby by e-mail at firstname.lastname@example.org.