This article is brought to you by:
IRA EPSTEIN
& COMPANY
223 West Jackson, 7th
Floor, Chicago, Illinois
(October 14, 1997) CORN:
Within the past week to ten days corn prices have advanced from
price gap support near $2.55 per bushel to resistance near previous
contract highs at $3.00 per bushel. In percentage terms corn prices
have advanced roughly 18 percent.
The rally began on Friday,
October 3rd as commodity funds purchased over 50 million bushels of
corn futures in response to Middle Eastern tensions and rising
energy and metal prices.
The rally continued on Monday, October
6th despite excellent harvest weather. In this instance, I believe
the commodity funds viewed a lack of farmer selling as signs of
strength and purchased futures once again.
On October the 8th,
China indicated that they would fulfill all existing contracts to
export corn. However, they indicated that they would wait until
their existing contracts were fulfilled before making a decision on
futures sales. This announcement was taken by the market to be a
confirmation that China would no longer be a major supplier of corn
on the world market.
Finally, the USDA released U.S. production
estimates for the 1997 corn crop on Friday, October 10th. The USDA
projected corn production at 9.312 billion bushels with a 125.8
bushel per acre yield and a 781 million bushel ending stock level.
In summary, the USDA crop estimates were roughly 100 million
bushels lower than the average industry estimate and bullish in my
opinion.
To summarize, expectations for U.S. corn demand have
risen dramatically while at the same time expectations of supply
seem to be falling. Together, the new supply and demand seem to
warrant a higher price structure. In my opinion, corn prices may
move near $3.20 per bushel within the first quarter of next
year.
Technically, however, I believe March corn futures should
encounter some resistance near prior contract highs at roughly
$3.00 per bushel.
Although I believe corn may eventually extend
above $3.00 per bushel, I expect a consolidation or price
correction beforehand. In my opinion, corn futures seem a bit
overextended as indicated by the stochastics.
In addition, March
corn futures seem to be near the top of what I believe is an upward
trending channel.
The channel boundary, prior contract highs, and
overextended market conditions seem to warrant a price correction
or consolidation at the very least. In the event of a correction,
prior levels of support should be monitored closely for signs of
support and an opportunity to establish lower risk long
positions.
Mike Peifer
IRA EPSTEIN &
COMPANY 223 West Jackson, 7th Floor,
Chicago, Illinois (October 16, 1997) CORN: December
corn still appears to be the leader in the grain complex. Strong
fundamentals such as tighter world stocks and below average yields
in the U.S. are helping support this market. This market is now
approaching an overbought situation according to stochastic
studies, so I am not recommending aggressive buying at current
levels. With harvest only 30% completed a lot of grain has yet to
hit the market place and this could help pull prices back a bit. On
a break I would look to buy December corn into the old channel line
support near the $2.78 level. This area also happens to be this
summers highs. A 23-cent break occurred after this August's high
was made. By adding 23 cents to the $2.78 price level, I project
this market up to the $3.01 level. I believe corn is strong enough
to challenge this level in the near future and would trade
accordingly. | Boyd Baker
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