Could Producers See Corn Prices above USDA’s Cost Standard?



Trend channel

Corn futures prices for December 2015 expiry were trading below the support level of 360 cents per bushel at the end of the day on November 10, 2015. The World Agriculture Supply and Demand report, released on November 10, was more supply-supportive than analyst projections. The report pushed the corn futures prices below two significant support levels of 365 cents and 360 cents per bushel. The price trend began an even steeper decline on the day. The transaction volume rose above 51% on the day due to excessive supply support.

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Price drivers

The WASDE report supported the production, yield per harvested acre, and inventories at the end of the marketing year more than analyst anticipations. Favorable weather conditions for the harvest in the Corn Belt might help corn prices. Technical selling on the stronger-than-expected supply in the WASDE report also pushed the corn futures prices down on November 10.

Corn prices have dropped significantly for US producers. However, South American transport strikes have continued to hinder supply in the region, which could revive corn prices from their current slump. Due to the pressure from high supply, corn prices could remain in the range of 355 cents to 375 cents per bushel.

Stock movement

Due to the supply-supportive World Agriculture Supply and Demand Estimation report on November 10, 2015, corn prices fell. Therefore, prices of related businesses should have risen. However, shares of Bunge (BG), Archer Daniels Midland (ADM), and ConAgra Foods (CAG) fell by 1.4%, 2.2%, and 0.41%, respectively. In contrast, shares of Tyson Foods (TSN) rose slightly by 0.42%, ending a two-day declining trend.

The PowerShares DB Agriculture ETF (DBA) also dropped by 0.39% on November 10, 2015, which was its fifth day of continuous decline.


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