I continued with my short positions on corn this week by holding onto ten December 2013 contract and ten March 2014 contract. I was hoping that the price of corn will continue to drop due to the larger than expected harvest this year. However, things didn’t go as planned.
Although seasonal pressure stemming from the ongoing harvest is probably weighing upon corn futures, corn rose modestly Monday morning. That very likely represented a response to strength spilling over from the soy complex. December corn futures edged up 1.5 cents to $4.3475/bushel by late Monday morning. So what happened to the soy complex, which messed up my plan? I found that rumors of Chinese buying reportedly boosted the soy complex Monday. Although there has been no official news during the government shutdown, persistent rumors of Chinese buying are apparently pushing soybean and product prices to start the week. Ideas that last Friday’s drop was overdone may also be encouraging buyers. Concerns about wet weather hanging over the Corn Belt and its potential impact upon the fall harvest boosted corn prices as well.
Another major contributing factor to this increase in corn price is the U.S. dollar weakness. The federal government shutdown ended late Wednesday evening, which seemingly caused a surprising drop in the value of the U.S. dollar. The commodity sector generally rallied in response, with corn futures moving modestly higher. Bulls were also encouraged by a private report that China bought over 1.0 million tonnes during early October.
Chinese news and dollar slippage also boosted soybeans. Chinese officials announced had sold 281,783 tonnes of soybeans from reserves, which represented over 56% of the total offered. That seemingly implies robust demand. I think the price of soybean will continue to rebound especially when combined with the bullish aspects of the dollar breakdown, so I went long on November soybean on Wednesday and I finally made a right prediction this time.
Have a great weekend!