wmeubank@ocp.kcmo.com
IRA EPSTEIN & COMPANY
223 West Jackson, 7th Floor, Chicago, Illinois
(November 24, 1997) CORN: Corn futures continue to correct after the sharp price advances recorded during the first week of October. In my opinion, speculator liquidation ahead of the first notice day and related weakness in the soybean complex have continued to pressure price despite a resurgence in demand.
Friday, November 28th marks the first day that corn may be delivered against the December futures contract. Deliveries are assigned after the market close and are based on the age of the outstanding futures contracts. In other words, the oldest outstanding long position is assigned delivery first. Currently, open interest for the December futures contract remains relatively high and I believe the large commodity funds hold the bulk of old long positions. In my opinion, December corn futures are vulnerable to additional fund liquidation which may continue to pressure price in the short run.
Soybeans, on the other hand, may continue to see near-term price pressure due to what I believe will be a larger South American crop. Attention has recently turned from record demand to optimal planting weather allowing for rapid planting progress. Soybean price pressure may continue to keep pressure on related corn prices.
Nevertheless, I remain a longer- term corn bull. In summary, U.S. corn stocks and world grain stocks remain fairly tight historically. Therefore, I believe near-term liquidation pressures and related crop weakness will eventually give way to long-term supply concerns.
Furthermore, I believe end-users remain uncovered and will increasingly utilize price weakness in the short run to purchase corn futures for protection against further price advances. In my opinion, commercial buy programs will become increasingly aggressive as corn futures decline near 2.75 basis the March contract.
Technically, I believe the March corn futures should successfully challenge support (previous resistance) near 2.75. Additionally, I believe the stochastics are indicating oversold conditions.
In my opinion, oversold stochastics in a bull move may be utilized in conjunction with other indicators as a buy signal. Therefore, traders may wish to position long the March corn futures if or when they return to support near 2.75 basis the March contract.
Michael Peifer
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