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There is a technical term traders may use right now for the chart of the Chicago Board of Trade’s December 2014 corn futures contract. It sucks.
The price is threatening to enter multiyear lows after the recent rally failed.
The reversal is a reminder of the danger dealers face if they over-extrapolate geopolitical issues at the expense of longer term fundamentals.
Corn was well above $5 a bushel for much of the spring as the market worried that the Ukraine crisis could crimp eastern European supplies.
But, just as an easing of tensions between Moscow and the west has helped Russian equities recapture pre-crisis levels, so the corn price has fallen back as fears of further sanctions and agricultural disruption faded.
The US Department of Agriculture on Wednesday said that global corn reserves may hit 182.7m tonnes before the 2015 harvest, mainly on the back of increased output from many of the world’s biggest producers.
That is the highest inventory in 15 years, according to Bloomberg.
Still, a pause may be due. Corn’s 14-day relative strength index of 30 suggests it is flirting with “oversold” conditions.
This is the last note for four weeks as Trading Post takes a sabbatical
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