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Could Higher South American Output Affect Domestic Corn Consumption?

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Trend channel

December futures contracts for corn were above 360 cents per bushel on November 20, 2015. Corn traded above 365 cents during the day, but due to supply pressures, it was dragged down near the support level. The volume of contracts rose by 10.9% and open interest fell by 9.4% on the day, suggesting speculative technical selling. Current prices are below major moving averages. Amid favorable weather conditions in South America, corn production might increase. The currency devaluation of the ruble and the Argentinian peso could hurt US consumption of domestic corn.

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Price drivers

Analyst anticipation in regards to the conclusion of the harvest in the next crop progress report supported the supply sentiment on November 20, 2015. Supply sentiment received further support from the slow pace of exports from last year and the approaching winter in the US. Lower prices after the producers’ decision to store their harvest without any future projection of a rise in prices dragged the corn price sentiment down.

The US dollar index rose on the day by 0.65% adding more woes to the lower export sentiment. However, higher ethanol and light selling supported wheat prices. Prices also received support from the feed demand on the day. Corn futures prices are anticipated to oscillate in the range of 360 and 370 cents per bushel from the support and resistance level.

Stock discussion

Tyson Foods (TSN) continued to fall on the second consecutive day by 1.8% following the corn price pattern on November 20, 2015. Archer Daniels Midland (ADM) and Bunge (BG) also fell by 1.7% and 0.92%, respectively. ConAgra Foods (CAG) fell by 0.61% after two consecutive days of decline.

The PowerShares DB Agriculture Funds (DBA) rose by 0.44% on November 20, 2015.

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