Corn futures (symbol: C) are trading lower following the Acreage report released by the National Agricultural Statistics Service (NASS – a division of the USDA). Quoting … “Corn planted area for all purposes in 2014 is estimated at 91.6 million acres, down 4 percent from last year. This represents the lowest planted acreage in the United States since 2010; however, this is the fifth largest corn acreage in the United States since 1944.”.
Price movement since the press release is important as it broke the long-running uptrend line dating back to Dec05, which originates at the $1.8575/bushel level.
The following chart reflects corn futures price dating back 10 years.
The move down from $8.4375/bushel on 10Aug12 has been aggressive and unrelenting. Perhaps most notable on the chart is the Jul13 gap down from $6.84 to $5.4975. Murphy & Co. expects corn to spend very little time in the $4.00-5.50/bushel range and eventually resume the path to lower prices for the following reasons:
- the $4.00-5.50/bushel price range has historically proven to be a ‘transitional area’ for corn
- corn technically violated the long running up trend line which originates from the Dec05 low, and
- while volatility may find some support at this level, we expect volatility should retrace back to the levels seen in 2000-06.
A potentially huge buying opportunity is on the horizon for corn, however, we believe it is from lower levels. Substantial support lies at the $2.90 level.
Murphy & Co’s Corn model is currently flat, holding no position. To learn more about Murphy & Co’s position models, visit http://murphycofutures.com/position-models/.