Be Aware of Corn's Seasonal Tendencies

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As July approaches, so does a pivotal time of year for grain markets.  During this part of the season, planting numbers have typically been finalized, and attention turns to weather and rain reports, particularly in the midwest, and to exports numbers, particularly to China, which imports many of our grains.

However, the Trump administration's so-called “trade wars,” which have primarily been directed at China, have helped increase volatility in the grain market as well as the U.S. dollar, which is also at least theoretically affected by the rising interest rate environment in the U.S.

In addition to this, the July WASDE, a major report for corn, will be delivered on July 12th. To sort out the situation in this commodity, we will turn to the weekly candlestick chart below, which shows the past three years of a continuous corn futures contract.

As the chart demonstrates, in each of the last three, and now possibly four, years, corn has had a series of lower highs. The high of the year has come in early summer.  In 2015, corn topped out in mid-July; in 2016 the high was in early June, and in 2017, the high was printed in mid-June. So far in 2018, the high was in late May, leading to a sell-off.

When each high was made during the prior three years, the price of corn continued to drag lower for months.  In 2015, the market made a series of new lows into the end of the year; in 2016, the low came at the beginning of September; and then last year, the low printed mid-November.

Should the pattern of lower highs repeat in 2018, the current bounce in corn should not last. We will look for shorting opportunities over the next two weeks, and we will keep in mind the potential of this market to go down overall into the end of the summer at least.

One thing the bulls have in their favor is that corn has experienced a series of higher lows. However, the bears’ first target would be a break of the lower trend line and a match of the June low of 338.75 and last year’s 336.25 low. A break beneath those prices would eliminate the pattern of higher lows and turn bears’ attention to the 2016 low of 314.75.

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