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COMMODITY REVIEW AND OUTLOOK
195 Route 6A, Suite 6, Orleans, Massachusetts
(August 14, 1997) CORN: Poor exports weighed on the corn market, as did carry over selling from corn and beans. The weather was also viewed as bearish, but it is likely that for good or for bad, the crop is made. If it was damaged by heat and dryness, it will remain damaged. Conversely there is a psychological aspect of more rainfall, and corn that was not stressed could still improve, and perhaps gain weight. As suspected, some technicians were discussing a double top in corn. While this could lead to further selling pressure, fundamentally, the corn is not there, either here or, just as importantly, in China. U.S. sales to Asia are likely to pick up due to poor crops in China. Imports remain to be seen, as China has ample corn stocks. This report makes it appear that 300 or higher December corn is in the cards. As regards the weather issue in corn, I suspect that much of the damage, if any is already done in most parts of the country. I am hearing reports of small ears of corn, which may account for the drop in production. World weather has not been terribly cooperative for grain production. Problems in China, Australia, Canada and Southeast Asia remain. That bodes well for US grain prices. For the longer term, I am of the opinion that the lows in corn are in, and that dips should be bought.
RECOMMENDATION–The market held up fairly well in spite of weakness in beans and wheat. If the 274-276 resistance area is taken out, expect funds to become aggressive buyers. Resistance basis December is near 272-274 and 278-280, with further resistance near 286. Support remains near 262, 257, 252-255, 247 and 239-237. Traders should buy December corn on dips to the mid- low 260's with stops of 5-8 cents or under 255. Longer-term traders should hold onto longs, and view dips as buying opportunities. I would also contemplate buying a penetration of 274. Objective is open. Conservative longer-term traders should buy December or March calls at current levels for the long haul.
M. Steven Morgan
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