As I talked about at the end of December, the strength of the rally in cash corn means I’ve had to use a different national index with more history. January came to a close with this cash index priced near $5.29, within sight of its next upside target near $5.50. This price marks the 50% retracement level of the previous major (long-term) downtrend from $8.26 (August 2012) through the low of $2.73 (September 2016). With the cash price the intrinsic value of the market, there’s a couple things to consider with this long-term chart:
- Fundamentally corn is incredibly bullish, as indicated by the inverted forward curve of the futures market. On the monthly Stocks-to-Use chart I talked about on January 30, the cash corn market is moving within sight of what we saw during the 2013-2014 marketing year. However, based on the strong correlation between the July 2021 contract and the July 2008 issue, it’s possible we could see stocks-to-use tighten to near the 10.4% level. Note this cash index topped out during the 2007-2008 marketing year with a June 2008 high of $6.98.
- Technically cash corn clearly broke out of its sideways pattern between $2.73 and $4.03 during December 2020. Using simple technical analysis of flipping the sideways range ($1.30) and adding it to to the breakout point (approximately $4.03) established a technical target of $5.33. Based on this analysis, cash corn could be reaching its peak, again with the next upside target up near $5.50. Also, note monthly stochastics are at or near 100%. This means we should be looking for a potential bearish turn signal over the coming months.