Can Short Covering Rally Corn?

CBOT Jul19-Dec19 Old/New crop calendar spread is continuing its trend lower, narrowing further to -18 cents under and making new contract lows of -20.50 cents under this week. The spread also has an additional 12 cents lower towards -29.5 cent full carry levels, giving producers additional carry to recover. The Jul19-Dec19 spread, was holding better support last month, but broke down below -16.5 cents prior lows, now a key resistance level in the near term. This gives the market considerable room for further decline on the chart if participants decide the current stockpile of corn is over supplied relative to demand, and after last weeks shocking corn find with additional bushels left off on farm surveys, which send outright prices lower. In order to offset this extra supply, the corn market is going to need confirmation of more favorable China trade talks as well as a firmer domestic demand from ethanol production.

While below the 3/35/2019 high ($3.80) in front month May19 corn, it will be hard for spreads to widen (head higher on chart), and particularly hard for Jul19-Dec19 to at all given the current supply estimates and carryout as a percent of stocks to usage. This is the fundamental rational behind the continued bear spreading in the corn complex, resulting in...

Dan's full "Spread Outlook" is available for download, including an indepth look into the most liquid spreads and market conditions that might present opportunities for spreading! Complete with charts and cost of carry calculations!