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Global Trade on Corn Futures | Technical Analysis & Price Outlook

The Impacts of Weather and Global Trade on Corn Futures

In This Article We Talk About The following Content

  1. Introduction
  2. Weather Challenges in the American Midwest
  3. Uncertainties in Ukrainian Grain Shipments
  4. South American Supply Boost
  5. Technical Analysis and Price Outlook
  6. Conclusion

Introduction

Corn futures have experienced a notable increase, surpassing $6.4 per bushel in mid-June. This surge can be attributed to various factors, including concerns about low supply caused by adverse weather conditions in the American Midwest and uncertainties surrounding Ukrainian grain shipments. On the other hand, the global corn production forecast indicates a potential record high for the upcoming marketing year, primarily driven by increased supply from South American countries such as Argentina and Brazil. In this article, we will delve into the recent developments affecting corn futures, exploring the influences of weather patterns and international trade dynamics.

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Weather Challenges in the American Midwest

Dry weather conditions in the American Midwest have become a cause for worry within the corn industry. The region, known as a key growing area, has encountered unfavorable weather patterns that pose a threat to corn yields. Initially, optimistic estimates projected record-high production in the United States for the next marketing year. However, the recent dry weather has forced analysts to reassess these projections and revise them downward. The potential impact of reduced yields has sparked concerns among traders and investors, leading to increased corn futures prices.

Also Read : Best Weather Apps for Accurate Forecasts | Top Mobile Weather Applications

Uncertainties in Ukrainian Grain Shipments

Russia’s position on the resumption of Ukrainian grain shipments has added to the market uncertainties. The current deal that safeguards these shipments is expected to conclude in July, and Russia has expressed doubts about its extension. This announcement has dampened hopes of a steady supply from Ukraine, which is one of the world’s top exporters of corn. The uncertainty surrounding Ukrainian grain shipments further contributes to the upward pressure on corn futures.

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South American Supply Boost

While challenges persist in North America and Eastern Europe, South America is stepping up its corn production. Countries like Argentina and Brazil have experienced significant growth in corn supply, prompting the United States Department of Agriculture (USDA) to forecast a potential record-high global corn production for the upcoming marketing year. The latest WASDE report highlights the role of South America in driving the surge in global corn production. The abundance of corn from these countries acts as a mitigating factor, tempering the concerns caused by reduced yields in other regions.

Also Read : Impacts Of Weather Conditions On Grain Market Crop Yields

Technical Analysis and Price Outlook

CBOT (Chicago Board of Trade) July corn futures exhibit an interesting price pattern and technical outlook. The price is currently approaching a resistance level at $6.44-3/4 per bushel. There is a favorable chance of the market breaking above this level, potentially leading to a further rise within the range of $6.68 to $7.05-1/2. The recent price action indicates a reversal of the previous falling trendline from $7.05-1/2, suggesting a shift in market sentiment.

Also Analyzing the price movement, the sharp surge from $5.47 could be interpreted as the completion of a three-wave cycle that originated from the high of $7.60 in May 2022. This observation implies that corn futures may revisit the peak of a wave (B) at $7.05-1/2.

However, When examining the continuous chart, we notice the contract stabilizing twice around a support level of $5.68. If we consider the price pattern as a flat formation that developed from the low of $5.61-1/2 in July 2022, there is a possibility of the price rising to $7.33-1/2.

While these technical levels provide potential price targets, it is important to note that market dynamics can shift rapidly based on various factors, including weather developments, trade policies, and global demand for corn.

Conclusion

Corn futures have witnessed a notable increase due to a combination of factors. Adverse weather conditions in the American Midwest have raised concerns about corn yields, while uncertainties surrounding Ukrainian grain shipments have further added to market pressures. On the other hand, increased corn supply from South American countries like Argentina and Brazil has mitigated some of the concerns, leading to a potential record-high global corn production forecast. Understanding the interplay between weather patterns, global trade dynamics, and technical indicators is crucial for accurately assessing corn futures and making informed investment decisions.

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