I’ve had to bring in a relief pitcher to talk about cash corn this time around. For my monthly analysis at the end of December I’m using an index posted on the Minneapolis Grain Exchange, with a symbol of ICY00. Note this cash corn index finished December at roughly $4.70, while the cmdty National Corn Price Index (NCPI) I usually analyze was calculated near $4.67. I’m using the ICY00 now because it has more history, and in order to see some potential upside targets we need to go back to the peak of $8.26 from August 2012. From here the ICY00 fell to a low of $2.73 during September 2016 before abolishing a sideways trend. From that low through the high of $4.45 (July 2019) the ICY00 posted a somewhat clear 5-wave major (long-term) uptrend. Then from the July 2019 peak through the April 2020 low of $2.77 the argument could be made the ICY00 followed what looks to be a 3-wave downtrend, though Wave B was more of a sideways move than wave.

However, at the end of May 2020 the ICY00 (and NCPI) saw its monthly stochastics establish a bullish crossover below the oversold level of 20%, an indicator the major trend was set to turn up. Cash corn initially rallied, posting a high of $3.27 during July 2020, before the end of that month saw the ICY00 (and NCPI) post a bearish outside range. This indicated a potential peak to Wave 1 of a new major uptrend, though the trend still had not been confirmed by a a reversal pattern. Early August saw the ICY00 fall to a low of $2.86 before abruptly rallying to a monthly high of $3.26 and closing at that high. This was the much anticipated reversal, of the 2-month variety, that confirmed a new uptrend. Since this past August’s close cash corn has not slowed down with strong rallies seen by both the ICY00 and NCPI.

With the cash market continuing to climb, what are some long-term upside targets for the ICY00? The initial target is hard to read, partially hidden by a chart marker, sitting near $4.84. This price marks the 38.2% retracement level of the major downtrend from the August 2012 high through the September 2016 low. However, with national average basis still strong and futures spreads inverted, the upside target range could be extended to between $5.50 and $6.15, roughly the 50% and 61.8% retracement levels of the previous major downtrend.

A couple questions/concerns come to mind:

  1. How long might the rally last?
    • Theoretically a major trend tends to last at least a year. Recall this new uptrend was confirmed during August 2020, so it’s possible it could last though at least
      August 2021. However…
  2. Monthly stochastic are already well above the overbought level of 80% and actually above 90% at the end of December.
    • This in and of itself does not signal the end of a trend, particularly when fundamentals are as bullish as they are because…

Newsom’s Market Rule #6 states: Fundamentals win in the end.