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(March 7, 2002) CORN: Corn futures were supported this week from strength in the soybean complex and ideas a seasonal rally could develop. However, demand concerns and producer selling of cash will limit a price advance. The USDA Supply-Demand report will be released on Friday and is expected to show a reduction in exports. Inspections were good last week at 57.0 MB but we need to ship 42.8 MB on a weekly basis to reach their forecast of 1.975 BB. With 26 weeks left in the marketing year, it is unlikely this will be achieved. China's cancellation of 720,000 tons in corn purchases recently implies their import projection of 1.0 million tons could be lowered as well. The Commitments of Traders report shows the funds and small traders continue to increase their short positions while the commercials are adding to their longs. This could spark a short covering rally but a catalyst is needed. Unless there is a surge in demand or traders lower their estimates for a 2-4 million increase in 2002 corn acreage, it will be difficult to happen.

July futures are attempting a seasonal rally as prices are usually strong in March. However, there are bearish forces in place the market must overcome for this to develop. A bottom occurred last week at 212 and the market is in a basing pattern. In order to break the downtrend, prices must rally above 223. If this occurs, then liquidation of short positions held by the funds could trigger a recovery to 232. However, the course of least resistance is down and unless this develops, the market appears to be headed toward 206-203. A sell-off to 195 would be the extreme. December futures could trade as low as 215-210 provided the market does not trade above 236. The market should be watched for a bottom if it is trending lower around April 4.


 
Dewey Strickler

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