Corn prices remain close to record high amid rising demand
- Corn prices are down by 0.41%, marking the second consecutive session of losses.
- Strengthening US dollar is creating an unfavorable environment for corn prices.
- The record purchase from China, coupled with this week's sales to Mexico and Japan, have supported corn prices
Corn futures are trading on a low for the second session in a row. On Wednesday, the futures were down by 0.41% to trade at $542.53. The losses in corn prices are a reaction to the strengthening US dollar. However, the prices are still on an upward trend as demand for the commodity rises.
Strengthening US dollar
Corn prices are declining as a reaction to the strengthening US dollar. On Wednesday, the dollar index was up by about 0.09% to trade at $91.279. DXY tracks the performance of the greenback against other major currencies. The dollar is reacting to the bullish ADP national employment report. Nonfarm employment in the US has risen by 174,000 compared to the forecasted 49,000. The reading is also higher than the previous decline of 78,000 jobs.
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The USDEUR currency pair is also up by 0.22% while USDGBP is trading at +0.17%. Like most other commodities, corn prices have an inverse relationship to the US dollar. This means that a strengthening greenback results in the decline of corn prices.
Rising demand for US Corn
On a daily chart, corn futures traded on a low for the second day in a row. However, the prices are still near the record high set in the past week. The high demand for US corn from China has helped curb the losses.
Last week, the USDA reported that China had purchased 1.36 million tonnes of US corn from private exporters. The purchase was the highest since July 2020. This week, the agency has indicated that US private exporters have sold 125,730 and 110,000 tonnes of corn to Mexico and Japan respectively. The orders are to be delivered within the 2020/21 season.
Corn prices technical outlook
Since mid-December 2020, corn prices have been on an upward momentum. Between 11th December and 3rd February 2021, the prices have surged by about 22.87%. On 1st February 2021, corn prices were at a high of $555.56, which is the highest level since June 2013. Subsequently, investors took profit, hence the decline over the past two sessions.
However, the commodity is still trading above the 20 and 50-day exponential moving averages. Besides, the fundamentals point to a bull market. As such, I am of the opinion that the prices will continue to rally. As for the resistance, the levels to look out for are last week’s high of $555.56 and $550.14. On the lower end, corn prices are likely to find support around last week’s level of $540.04.