Long Corn

I think the stars are finally in line for a good corn rally.  The insurance company people I speak to are telling me that there are a lot of replants happening, and that there will be a lot of preventive planting taken.  Some of the ground that would have been planted in corn will instead be planted in soybeans.  In short, I believe we have a situation where the top end of the corn market has been taken off.

​Seasonally, we are well into the period which should produce weather rallies if we are to get one.  The seasonal chart below proves that pollination fears in June are largely unfounded.  Corn mostly moves higher through May.  Positive net returns are achieved between December and May.  You usually want to have 75% of your corn marketing finished by then.

Corn optix did reach excessive pessimism this week.  The corn market is running out of sellers.  As a function of the commodity markets, when a person is short a position, the way to exit the position is to buy.  This creates a rally which triggers stops which creates more buying.  Speculators notice what is happening in the corn market then they decide to buy.  So what you have is a buying frenzy happening between the greedy speculator crowd wanting to get on board the train and frightened people who are short trying to get off.  This is why sometimes you get huge moves in the market while the experts are busy explaining the rally away finding some sort of news out there to credit the rally to.

The corn chart is showing a massive coil, or spring.  Moves out of a spring tend to be sudden and strong. 

As I look at corn, I believe the risk is to the upside.  I would not want to be short here and believe we will have a good chance for $4.00 corn and maybe a lot more.  Keep in mind, these kinds of rallies disappear as quickly as they happen.  It would not be a shock to me for corn to be back below $4.00 a month from now.

​For the record, I have not made any corn sale recommendations to this point.  If corn optix reach excessively bullish levels in a few weeks, I will probably make one very large sell recommendation.