corn – Andrew Thrasher

The Smart Money Has Been Buying Corn

Posted on July 23, 2013 by Andrew Thrasher, CMT

It hasn’t been a great year for $CORN prices, they have been in a steady decline since August of last year. This weekend I noticed an uptick in the net position of Commercial Traders in the latest round of COT data. This is a group that normally isn’t net-long corn, but they are considered the ‘smart money’ for a reason and maybe they see something the rest of the market doesn’t.

This is the topic of my latest TraderPlanet article:

Commitment of Traders data is a great resource for getting a good idea of how various groups of traders are positions in various markets. Typically I like to see how the Commercial Traders (‘smart money’) is positioned, whether that’s net-long or net-short and to what degree. Zooming in on corn we normally see Commercial Traders hold some degree of a net-short position, which makes sense as they try to hedge out some of the risk associated with rising corn prices. Since 2009 there are just four instances where Commercial Traders went net-long – most notably in late 2010 when prices went from $3.40 to $8 and again last year before corn jumped higher.

Read the rest to see the my thoughts on the chart and the levels I’ll be watching.

Source: The Smart Money Has Been Buying Corn: Should You? (TraderPlanet)

Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see my Disclosure page for full disclaimer. Connect with Andrew on Google+, Twitter, and StockTwits.

Insight into Corn from Ned Davis Research

Posted on August 1, 2012 by Andrew Thrasher

I looked at corn a few days ago, pulling up the chart of the Teucrium Corn ETF (CORN) as well as some interesting charts from the USDA. Two of the analysts at Ned Davis Research were recently quoted in a Barron’s article as they looked at previous 20%+ moves in the crop and the resulting price action.

From Barron’s:

“[C]orn traders are shifting their focus away from the severity of the drought, saying the corn crop is developed enough that it has already suffered most of the damage it will sustain from the hot and dry weather,” writes Dow Jones Newswires’ Owen Fletcher this morning. “Traders say some market participants may already be exiting bets on corn towait for the U.S. Department of Agriculture on Aug. 10 to issue its newest supply-and-demand report, which is expected to include a revised forecast forthe corn crop’s yield.”

About the “history” mentioned a few moments ago: This is according to Ned Davis Research’s Warren Pies and John LaForge, who looked at 20%-or-greater one-month increases in corn prices. A year out from price spikes, prices aren’t much different. They’re range-bound, and tend to fall a bit as the fifth or six month approaches, they find.

Commercial traders have gotten back to a net short position since June, Pies and LaForge also note. This should tell us a thing or two. “This, like most of the other evidence we point to, does not mean corn’s move is done, but it does indicate that the ‘easy money’ has already been made,” they write.

So Pies and LaForge feel the ‘easy money’ has already been made in corn, which probably isn’t a stretch considering the corn ETF is up approx. 40% in a little over 2 months. Traders will be watching that August 10th USDA crop report for further insight into the awful crop season we have had.

Source: Corn Rally: Enough is Enough

What You Need to Know About Corn

Posted on July 25, 2012 by Andrew Thrasher

Corn has been a touch subject for many traders. I see a lot of traders posting their attempts to trade corn on Twitter, some have been successful others…not so much. Most have a gut reaction to think it has come too high too fast and still have the visual of when silver got up to $43/oz. before crashing to $29/oz. in a matter of days last year.

The drought being experienced in the Midwest has been awful, and as an Indiana resident I can attest to the number of 100+ degree days we have been having in Indianapolis. Below are some charts I’ve pulled from the USDA to show just how bad this year’s corn crop is.

First up we need to determine where most of the corn has been harvested in the past so we can zoom in to those states. Below is a chart that shows the number of acres of harvested corn in 2011.

It appears Iowa and Illinois were the largest harvesters of corn last year. So next let’s take a look at the current crop. Below we can see the progress of corn in Iowa. The top panel shows the percentage of crop that is good to excellent condition compared to previous years, 2012 being the red line.

And we are seeing similar weakness in Illinois…

Although the corn crop this year appears to be the worst at least through 2008, the price seems to be showing signs of potential weakness.

First up when looking at the price action in corn, I’m noticing that momentum (as measured by the RSI indicator) has been practically stagnant, making slightly lower highs but finding support near the 67 level.

Second, we will look at the bottom panel, the money flow index, which takes into account both price and volume. The MFI indicator has been creating a negative divergence for a few weeks now, but just recently it has taken out its previous low which completes the bearish divergence, as per the criteria laid out by the indicator’s creators, Gene Quong and Avrum Soudack.

Third, volume has been trailing off, setting lower highs while the price of the corn ETF rose and then has initiated some sideways action. Also notice that today’s attempt to stay above $50 was done on anemic volume.

The reason I started this post with charts from the USDA which shows the dire condition the corn crop has been in, is to remind readers that when it comes to commodities there is more to performing due diligence than JUST looking at the chart. However, while conditions seem to be worsening (we had another 100 degree day today in Indy as a matter of fact) the chart of corn appears to be showing some signs of exhaustion. It all comes down to which will traders give more credence, the crop reports or the chart?

Anecdotal Agriculture

Posted on July 23, 2012 by Andrew Thrasher

I’d like to cover two related topics in today’s post…first a piece of anecdotal commentary from my grandmother who owns a farm in Illinois and second a couple COT charts.

I got an email from my grandmother over the weekend about her farm. There has been a piece of Illinois farm land in my family for I don’t know how many years, but the farmer who owns the land next to my grandmother’s farm is the one to tends to it. My grandmother just handles timing of when she sells her crop.

I’ve tried to keep up with my grandmother regarding the drought the Midwest has been experiencing the past few months and it’s impact on the land. At first it seemed Illinois farmland was holding up better than that of Indiana (the state I live in). However, In her latest email she said that farmers aren’t expecting to have any hay by September to feed the cattle. She said the entire state of IL is in worsening shape except the north-eastern portion (i.e. Chicago). Originally her crop was holding up fairly well, with the corn crop having deeper roots than previous years which allows it to endure the wind. Unfortunately, I’ve heard some farms in southern Indiana have already mowed down their crop for the year since there was little chance of saving it. It’s extremely sad what many farmers are going through this summer. Few people I’ve spoken to believe it’s too late for rain and that even if we got some it wouldn’t make a material difference on many of crops here.

Now this is just the opinions of a single person who owns a farm. It doesn’t mean this is the characteristics of other farms, but I thought you all would find it interesting as a different view than just USDA data.

Now onto the COT charts for this week….

With that being said about the worsening conditions for farmers, we are seeing historically high net long positions in feeder cattle. The highest through 2007.

We are seeing opposite action in the wheat market. With commercials extremely net short and large traders historically net long.

I look at COT data each week because I think it’s key data when evaluating various markets. It’s one of the few places you can get a glimpse of what traders are actually doing. However, the drought we in the Midwest are experiencing is considered by many a game changer. There is a chance the awful crop season is priced in to the affected futures markets but the summer isn’t over and the weather could shift the playing field at anytime.