Front month, July Corn has declined by nearly 13% over the last month. Friday’s reversal began after the market sold off down to the support at the January highs around $4.50. We’d been skeptical of the spring rally as commercial producers seemed hell bent on getting the 2014 crop hedged prior to planting, selling more than 340,000 contracts between February 1 and April 1. Now, it seems the market is turning and the commercials have shown their interest as net buyers in each of the last four weeks.
Commercial Activity
End user commercial traders’ buying has added about 35,000 contracts over the last few weeks. This has been more than enough to turn our commercial trader momentum indicator positive. Meanwhile, the market’s month long sell off has been more than enough to push our short-term market movement indicator solidly into oversold territory. Finally, Friday’s reversal brought the market back above the oversold level and triggered our COT buy signal.
The Trade
We’re buying July corn and placing our protective sell stop under Friday’s low of $4.47. We believe that in a value driven market, no one knows the value of the underlying commodity like the ones who produce it or, the ones end up using it. It seems at $4.50 per bushel the value lies with the buyers.
