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877-853-2202(March 14, 2002) CORN: Corn futures rallied until mid-week but stalled as there is no fundamental catalyst to sustain a move higher. The funds are short 370 MB, including options, but the market lacks the "spark" that will force them to liquidate their position. Possibly this will come at the end of the month when the USDA releases the Quarterly Stocks and Planting Intentions report on March 28. Most traders are expecting acreage this spring to rise 2-4 million acres. However, we may fall short of this as bean prices have rallied since February and the farm bill will not likely be resolved until later next month. This could possibly "tip the scales" in corn acres rising closer to 1.5-2.0 million acres instead. Export inspections last week were in line with guesses at 34.0 MB. However, this is short of the average needed to reach USDA's projection of 1.925 BB. Unless we begin shipping 41 MB. on a regular basis, the USDA could eventually trim another 200 MB. from their forecast.
July corn rallied to 219.5 mid-week but has struggled since. Although March is normally a strong month for corn, that is not the case this year. When the market fails to stage a recovery, it tends to trend lower until late April or early May before bottoming. The technical indicators are mostly neutral and means it will be difficult for prices to sustain a rally unless some fundamental catalyst intervenes. Barring this, we appear to to be on course for a decline to 206-203 with 194 probably the extreme. The December contract could trade near 215-210. Watch for a bottom around April 4 if prices are trending lower. If July futures rally above 219.5 however, then the funds may liquidate some of their short positions and trigger a recovery to 223-227.
Dewey Strickler
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