03-12-2019: May Corn: Too Much International Competition

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Introduction
Intermarket
Parabolic

Nirvana
News
Point & Figure
Cyclic/Seasonal

Internal Progrm
Third System
Margin

Historic Range
Commitment
Volatility

Random Chart
Options
Calendar Spread

Level Table
Other Factors
Recommendation

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4     6

01

5     7

3


Introduction

1 All the grains are showing hard times for farmers because of overseas competition for export destinations. Encouraging weather worldwide allows nations like Russia, Austalia and the European Union toi outproduce and undercut U.S. exports at the same oil prices are low enough to stifle some use of corn for production of ethanol. The biggest problem is the Trump breakdown of trade relations worldwide, whether it be North America, the Pacific Rim or anywhere tariffs threaten to be applied. The midwest "support base" of conservative farmers that supported the current administration are learning the hard way that it has no understanding of their needs, meager government subsidies, and just general ignorance and selfishness when it comes to anything that benefits the "middle class."

The question remains how long, if ever, it will take Americans to "wake up." Current poll numbers suggest it could be quite a long while. Democrats are fragmented and hung up over issues like abortion and immigration, where comparatively simple "fixes" elude them to the point of absolute stupidity. Will it take a "three party system" before farmers will ever again see the light of day?


Intermarket Analysis

We fed Corn, Soybeans, and Spring Wheat into a neural network to get the following result:




Parabolic Chart

May Corn:

Parabolic Chart


Nirvana Chart

May Corn:

Initial Chart


News Analysis

Chinese Dalian corn is showing a little strength. A lower U.S. Dollar, which would be good for corn exports, is offset by weak global economic news and a sharp drop in crude oil meaning less corn with be needed to produce ethanol. Funds keep adding to a net short position in corn. South Korea recently bought 60,000 tonnes of corn. Ideal weather in Argentina and Brazil have been a bearish factor for corn, and their production levels will come in well above a year ago levels. A recent surge in the U.S. Dollar and bearish global growth have kept traders on the sidelines. The Burenos Aires Exchange left Argentine corn production projections unchanged at 45.0 million tonnes with the harvest seen as 4.1% complete. The U.S. Dollar reached a three-month high. One cargo of U.S. sorghum was sold to China which cold be a significant sign that there may be a start of agricultural purchases from the U.S. beside soybeans.

Average estimates in a recent supply/demand report left ending stocks at 1.751 billion bushels, compared to 1.735 billion projected in February. World ending stocks are estimated at 309.9 million tonnes versus 309.8 million tonnes projected last month. Argentina's production is estimated by the USDA at 46.0 million tonnes, unchanged from last month while Brazil's production is estimated at 94.6 million tonnes versus 94.5 million previously estimated. Most recent weekly export sales for corn came in at 969,700 tonnes for the current marketing year and 280,900 for the next marketing y ear for a total of 1.250,000 tonnes. As of February 28th, cumulative corn sales are at 65.1% of the USDA forecast versus a 5-year average of 71.0%.

The government shutdown created a big data vacuum that threw longstanding seasonal patterns out of whack. Data overall is interpreted when it finally came out as neither very bearish nor somewhat bullish. The new numbers don't create any urgency on the part of end users, who are enjoying weaker than average basis in the cash market. The ratio of stocks to usage could fall just under 12%. That is considered positive because it is in a range that has had history showing rallies into spring as the market recognized the need to plant enough acres to provide an adequate cushion against sub-par production.

Slow fall fieldwork and fertilizer application and a wet end to winter in the eastern half of the Corn Belt could help attract market attention. Farmers need some incentive to risk planting corn, and the futures are not providing it. When corn falls below $4.00 to where it is now, it is costing farmers about $0.35/bushel. Farmers now want to boost acreage only to about 90.3 million, a level that would tihgten carryout to 1.5 billion bushels or less assuming average yields and decent demand/

Corn looks better than soybeans at currently having a shot at being profitable. But a lot of farmers are still holding old crop corn at a carry at 15 cents for four months, which is an incentive to keep storing.

Highway BR-163 was closed in Northern Brazil due to heavy rain on March 5th, after weight limits were imposed earlier, affecting corn deliveries to ports. But it was re-opned on March 8th.

The EPA sent a draft rule to allow for year-round sales of E15 ethanol to the Office of Management & Budget for review. A timely rule is important for the summer driving season.

The National Corn Growers Association announced its support for the U.S.-Mexico-Canada Trade Agreement (USMCA). Mexico and Canada account for 25% of all U.S. agriculture exports. Mexico and Canada are the U.S. corn industry's largest and most reliable importers. The passage of USMCA would boost both national and rural economies.

Much larger corn crops this year from the EU, India, and Russia are more than offsetting reductions for Paraguay and South Africa. Exports are higher for Argentina, Brazil, and the Ukraine, while they are lower for the U.S. Imports for the EU are larger.

U.S.-China trade talks continue to keep U.S. agricultural commodities limited, but the weather outlook does favor the coming season. So far, China's purchases of hard grains in general barely dented the U.S. stock pile. A Pacific trade deal led by China also kicked in without any further


Point & Figure Chart

520.0|                                                                  R  3/ 8
     | CBT - May-19 Corn, 5000 bu., c/bu.          Cm.=0.60  Lim.=24.0
     |
     |
     |
500.0|_________________________________________________________________________
     |
     |                    X             X
     |                    XOX       X   XO
     |                    XOXO      XO  XO
480.0|__________________X_XOXO______XOX_XOX____________________________________
     |          X       XOXOXO      XOXOXOXO
     |          XO  X X XOXO OX X X XOXOXOXO
     |          XOX XOXOXO   OXOXOXOXO OXOXO
     |        X XOXOXOXOX    OXOXOXOX  OXOXO
460.0|________XOXOXOXO_OX____OXO_OXO___OXOXO___________________________________
     |  X X   XOXOXOX  O     O   O     OXO O
     |  XOXOX XO O OX                  O   O      X
     |X XOXOXOX    O                       O  X   XO
     |XOXOXOXOX                            O  XOX XO
440.0|XOXOXO_O_____________________________O__XOXOXO___________________________
     | O OX                                O  XOXOXO
     |   OX                                O  XOXO O
     |   OX                                O  XO   O
     |   O                                 OX X    O
420.0|_____________________________________OXOX____O___________________________
     |                                     OXOX    O
     |                                     O OX    O
     |                                       OX    O
     |                                       OX    O  X
400.0|_______________________________________OX____O__XO_______________________
     |                                       O      X XOX
     |                                             OXOXOXOX
     |                                             OXOXOXOXO
     |                                             OXOXOXOXO
380.0|_____________________________________________O_OXOXOXO___________________
     |                                               OXOXO O
     |                                               O OX  O
     |                                                 OX  O
     |                                                 O   O
360.0|_________________________________________________________________________
     |
     |
     |
     |
340.0|----|----|----|----|----|----|----|----|----|----|----|----|----|----|---
              1111111111                                 11
      888899990001112222112222444445666667779913344567789121
      011201120110230012030222001220011231120131223310212101
      525623973232105830502388372058626002811209900092004635
Our computer tells us a non-conventional reactive approach works best for corn on p&f charts. Therefore the above chart is taken as giving a buy signal.


Cyclical and Seasonal Factors

We are headed toward a cyclical high and a seasonal up period.

Cyclicals Cyclicals Seasonals
Seasonals


Internal Program

Our best-performing internal program is "Pattern". It is giving a (conditional) sell signal.

Internal Printout 1 Internal Printout 2

Results of "Pattern" for Corn (blue lines = successful trades, red, unsuccessful): (Always in the market.)

Results


Third System Confirmation

Our third system has triggered a buy signal. (Note, disregard the year on the chart. Our regular readers know this is not a Y2K-compliant system, but it still works.)

Third System


Margin

The point value is $50. Initial margin on a single contract is $770. Use of options is not advised.


Historic Range

Scale trade sellers are entering the market for the long term in this price range.

Historical Chart


Commitment of Traders

Commitment 1

In the chart below, the yellow line is the futures price, read on the right axis. All other colors are read on the left axis. Blue is small speculators. Red is large speculators. Green is commercials. Large speculators with the best track record are getting increasingly-short.

Commitment 2

Interpretation of a Different Site Below (Their trader categories may vary slightly from ours):

Commitment 3


Volatility / Probable Range

FB 1 FB 2

The average volatility shown below suggests that a change in major trend to up is imminent at a volatility low point.

Range/Volatilitiy Chart


Possible Future Prices

Random Chart


Option Recommendation

Our option trade recommendation is to Buy (1) Corn July 370 Call and Sell (1) Corn July 360 Call @ 5.250 to sell side or better.


o 1 o 2 o 5


o 3


o 4


Calendar Spread

What the Jan. - Jul. calendar spread suggests to us is that buying the near contract and selling the far one is at most times profitable, which we think is a sign that these futures may go flat in the long run. The best time to enter or leave the above spread is when it is at -13.0 or narrower buying the far as prices are rising and then selling the near, and exiting or entering when it is at -22.0 or wider selling the far as prices are falling and then buying the near. At this time, we appear to be at the sell the far, buy the near point.





Level Table:

Level Table

The path of least resistance is down.
470.0|                                                                  R  3/ 8
 CBT - May-19 Corn, 5000 bu., c/bu.          Cm.=0.60  Lim.=24.0
     |
     |
     |
460.0|_________________________________________________________________________
     |
     |F
     |DDFFF
     |DDDDFFFF
450.0|ADDEEEFF_________________________________________________________________
     |AADDEEEEEF
     |AAABCDEEEEF
     |AABBBCDEEEEFFF
     |AABBBBBCCCDDEEEEEFFF
440.0|AABBBCDFFF_______________________________________________________________
     |ABBBCDFF
     |BBBCCCDFF
     |ABCCCDF
     |ABCDF
430.0|AAAABBCCFG_______________________________________________________________
     |AAAABBBBFFG
     |AFFG
     |FGG
     |GGGGGG
420.0|GGGGG____________________________________________________________________
     |GGGGG
     |GGGG
     |GGG
     |GGG
410.0|GGGG_____________________________________________________________________
     |GGK
     |GGKKLLLL
     |GGKKLLLLLL
     |GGKKKLLLLL
400.0|GGHHHKKKLLLLMM___________________________________________________________
     |GGGHHHKKKLLMMMR
     |GGGHHHHHHKKLLLMMMMQQR
     |GHHHHHHKKLLLMMMQQQRTUU
     |GHHHHHHHHJKLLLMMQQQQRRRRSTTTTTUUUUUUUU
390.0|GHHHHHHHJJKKLLLMPQQQRRRRRSSSTTTTUUUVVVWWWW_______________________________
     |GHHHHHJJJKKKKLMMNPPPQQQQQQRRRRRRSSSSTTTUVVWWWWWWWXXXXXXXYY
     |GHHHJJJKKKLMMNNNNNNPPPPPPPQQQRRRRRRSSSSUUVVVWWWWWWWXXXXXXXXXXYYYYY
     |GHHHJJJJKKKMNNNNNNNNOPPPPPPPPPQQRRRRRSSSTUUVVVVVVWWWWWXXXXXXYYYYYZZZ
     |GHHJJJJKMMNNNNNOOOPPPPPPQRRRSSTUVVVVVVWWWYYYYYYZZZ
380.0|GHHJJJJKMMMMNNNOOOOPPPQRSSSTTVVWWYYYYYZZ_________________________________
     |GHHJJJJJJKMMNNOOPPSTTTWYYZZZ
     |JJJJJJMMMNNNOOPPTTTYYZ
     |JJJJMMNNNOOOPTTTZZZZZ
     |JJJJNNOOZZZZ
370.0|JJJNNOOOZZZZ[____________________________________________________________
     |JNOOOZZ[
     |OOOZ[
     |OOOZ[[
     |OOO[   <<<
360.0|OO_______________________________________________________________________
     |
     |
     |
     |
350.0|-A-B-C-D-E-F-G-H-J-K-L-M-N-O-P-Q-R-S-T-U-V-W-X-Y-Z----|----|-- TPO=-0.059
                                     1 1 1 1 1 1                      
       3 3 4 4 5 5 6 6 7 7 8 8 8 9 9 0 0 1 1 2 2 1 1 2 2 3           3
       1 2 1 2 0 2 0 2 0 1 0 1 3 1 2 1 2 0 2 1 2 0 2 0 2 0           0
       3 6 0 4 8 2 6 0 5 9 2 6 0 4 8 2 6 9 6 0 4 9 3 6 1 7           8


Other Factors

Multiple Chart Indicators Summary
Multiple Chart Indicators Summary


Here's an intraday chart for a previous day ( 3/06 ).

Intraday Chart


                 Risk Versus Opportunity Report
                ________________________________

                  CK9     May Corn

                      High Price:  373.7
                   Current Price:  364.2
                       Low Price:  344.8

                            Risk: -0.053
                     Opportunity: -0.108

                    (O/R) Ratio =  2.042


Overall Recommendation

Decision Weighting Factors
FactorsWeighted Points
Inter-Market Analysis + 1
Parabolic Chart - 1
Nirvana Chart - 1
News - 1
Point & Figure + 1
Cyclicals + 1
Seasonals + 1
Internal System 1 - 1
Internal System 2 0
Third System + 1
Historic Range 0
Commitment of Traders - 1
Range/Volatility + 1
Level Table - 1
Other Factors - 1
Total - 1
Place 21 May Corn on a Sell Watch with stoploss @ +16.75 above the get-in point when recent price is represented as "364-1/4".
____________________________________________________________________________________________________________________________________________W.G.