The chart above is a daily chart of July corn futures, which were down both last week and for the whole of May. (DTN ProphetX chart by Dana Mantini)
While fundamentals remain bullish rather than bearish, the sharp drop in corn prices during much of May and the first week of June seems odd. Granted, the pace of US corn growing picked up significantly last week and subsequent rains have likely left the current corn condition above average, which we’ll see in Monday’s USDA Crop Progress Report. The fact remains, however, that the US is well positioned to take advantage of Ukraine’s absence from world markets.
A look at Friday’s closing chart for July May reveals some truly bearish indicators. Corn in July is trading well below the 50-day moving average and the 20-day moving average has (barely) undershot the 50-day moving average. The latter is typically – but not always – a trend reversal indicator from the past. The last time such a crossover occurred was on 10/25/21 when the 20-day crossed up the 50-day. This led to a rally of almost $2.75 by the corn peak on April 29, 2022.
I have also seen this crossover result in a fake out where such a reversal does not occur. It is risky but I will put myself to the test and say that this bearish looking July corn chart is such a fake. I believe there is still more upside in the corn market. We will see. However, there is no denying that the current corn chart does not exude confidence for bullish traders but the market is becoming very oversold.
Similar to corn futures, the price of July KC wheat futures has only fallen $2.67 a bushel since mid-May, although wheat fundamentals remain bullish around the world. The weakness stems in part from the beneficial rains we’ve seen in the previously drought-hit western and southern plains and the notion that Russia would cooperate to allow Ukraine to open a shipping corridor for grain exports. With Turkey and Russia on Wednesday to discuss this, the likelihood of Russia allowing such a corridor, even if it intensifies attacks on Ukraine, seems like a pipe dream.
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