wmeubank@ocp.kcmo.com
COMMODITY REVIEW AND OUTLOOK
195 Route 6A, Suite 6, Orleans, Massachusetts
(October 10, 1997) CORN: SHORT TERM–Fund short-covering continues in corn. A rumor that China would be canceling exports was positive. However, there has been no confirmation, and if it comes, it wouldn't surprise me to see that the market had already priced in the event, and a selloff ensue. However, don't forget China had one of the worst growing seasons in history, and they are historically the second largest exporter of corn, behind only the U.S. If they are unable to export, we should see increased U.S. market participation.
There was also a report that El Nino effects would be very strong. Hedge selling is beginning to pick up on the rally. Usage has been strong for the most part, and may provide support. Friday's grain report will be important, and may provide the impetus for a solid move. The range of guesses is from 9.24-9.54 with and average guess at about 9.40. I remain very bullish corn.
RESISTANCE–Resistance basis December is near 286, 289- 290 and 295.
SUPPORT–Support remains near 278-280, 272-274, 266-268, 262, 264, 258, 252-255, 248.
RECOMMENDATION–I question whether this rally has staying power, as harvest has yet to really get underway in the corn. Aggressive short--term traders might sell December corn on a report-related rally with stops of 5- 10 cents, looking for the mid-upper 260's. Long-term traders might buy dips of 5 or so cents for the long haul. More conservative traders should wait out the report or trade via options. Option traders might sell December 280, 290, or 300 calls on rallies. Risk 5 cents. Experienced option traders might buy March or May calls and sell December calls for the time premium. Most option traders should wait for the action to subside, as option values have gotten very pricey in the last week.
M. Steven Morgan
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Last updated on 10-12-97
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