Could we be seeing a trend in corn prices?
Corn futures prices for March 2016 delivery were trading near the crucial resistance level of $3.70 per bushel on January 20, 2016. Prices continued to rise on the third consecutive day and climbed above the 50-day moving average of $3.67 per bushel on January 20, 2016.
Prices were above 50-day moving average for the contract previously on October 30, 2015. Prices are might continue to face strong resistance at $3.70 per bushel. The chart below suggests that corn could oscillate in the bracket of $3.65–$3.75 per bushel in the near term.
What’s really driving corn prices
Amid unfavorable cold weather conditions domestic feed and fuel, a demand supported corn prices on January 20, 2016. But lower-than-cost rates of US corn in domestic markets could continue to discourage farmers from selling their proceeds and restricting the supply.
Unfavorable weather conditions from South America might support US corn futures prices with cues of lower export competition. Good pricing of US corn supported the ideas of higher export from USDA’s Mexico sales data. Meanwhile, the US dollar depreciated by 0.06% on January 20 and supported exports, as a lower US dollar is favorable for the export of US goods.
What this could mean for corn stocks
Corn producing and corn trading companies could increase in value because a rise in corn prices would increase stock value. On January 20, 2016, with the advance in corn prices, companies like Archer Daniel Midlands (ADM) and Tyson Foods (TSN) increased after four consecutive days of fall. These shares dropped by 11% and 7.2% during the four-day period, respectively. By comparison, share prices of Bunge (BG) continued to fall on January 20 by nearly 2% on the sixth straight trading day. BG shares decreased by 10.2% during the six-day period.
Meanwhile, CHS (CHSCP) declined by 0.60% on the second consecutive day, falling by 1.0% during that period, and the PowerShares DB Agriculture Fund (DBA) dropped by 1.4%, continuing its downward price movement after a brief rise on January 20.
Now let’s look at what happened with soybeans on January 20.