This week, I decide to go corn, to try something different. But I will keep an eye on soybean (which by lucky, I got some profit out of it). Since its market is so fluctuated, if you lose big, you can also win big. In the coming week, I will go long on soybean base on the information last Friday and also the fundamental analysis about it.
Let’s start from the four aspect of the fundamental analysis: demand, supply, storage and policy.
The IGC announced that the demand may likely to decline as of the tight supply and high price, as well as the decrease demand of feed and industrial use[i]. However, from my point of view, decreasing demand will cause decline of future price would not necessarily happens. For two most important reasons: one, industrial need of corn is an upward trend; two, china, as a large exporting country, has transformed into importing country, according to the recent report. Plus, in the last three years, Chinese government has utilized large amount of inventory to smooth the inflating prices. This year, china has no choice but to choose to import. Combined these two point, I think demand will not decrease largely.
From the supply side, corn supply will be even tighter in the coming days. Corn price had a surge on sept 28th since an unexpected low inventory level report by U.S department of agriculture. [ii] The market quickly reacted to it, price increased as much as 46 dollars! Plus, another information, which the market has not react to before the week ends is that the IGC report claimed a more lower harvest estimated a years ago. Hence, for the coming week, corn may continue to go crazy after this week.
For the storage, china and US as I mentioned above both have low strategic inventory level which can drive up the market price. From the policy side, some economists predict that US government will introduce QE policy, no matter how much it work, it is an upward pushing force.
In conclusion, I expect corn price will keep up in recent 2 days. But When it comes to mid-orctober the new harvest of corn come to market, The price may adjust back.
Tags: 4 Comments
4 responses so far ↓
Hey Amber, good job on your analysis. I am thinking that corn will increase in price only for a very short term. Not sure if I’d invest in the soybean market. If I do invest, I’d probably go short because of a lower demand from China due to their economic slow down, and the expectation of large harvest in South America for soybeans. Have fun, and enjoy more futures investments!
thank you vicky!
both of us have good luck！
Hi Amber,
Thanks for sharing your strategy. Please try to do three separate postings: one commenting on what went right or wrong, another on their plans for the coming week, and a third discussing new information sources. I can see you touched upon those things in your posting. Yet it’d be nice to see if you can do separately as suggested by Prof Jim. Thanks.
hi, Yijeong,
thanks for noticiting. The first week, since there is only one transaction. so i didn’t post the ” what went right/wrong”. however, i do mix the cool source and analysis together. sorry.
this week, everything will be perfect. let’s wait and see.
regards