Why Now Is the Time for Corn

Includes: DBA, GRU, JJG
by: Matthew Bradbard

Why corn and why now? Since the January USDA report prices of corn have come down approximately 15% but failed on two occasions, most recently this week and early February, to get much lower than the current levels. On both the daily and weekly charts we are at oversold levels and as one can see from the chart above we are very near a trend line that has been able to act as a floor for the past three years. On average over the last four decades corn prices have been a gainer in the first five months of the year. Past performance is not indicative of future results. Digging deeper month over month within the same time frame we’ve had 116 positive months and 84 negative months. (2010 not included) Two weeks from now we have the most influential USDA crop report of the year; Planting Intentions report. Being we need to buy an additional 3-4 Million acres of corn, we feel prices need to be higher to entice farmers to allocate more acreage to corn. Not to mention that with less than ideal weather we are anticipating planting delays. All things considered we have a first target of $4.50 and see it possible to trade up to $5 the later part of 2010. We are suggesting clients to have option exposure in July and futures exposure in December.

Risk Disclosure:

The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.

MB Wealth Corp. is not responsible and does not endorse anything out side of the content of this article authored by Matthew Bradbard, President of MB Wealth