Corn price prediction: a breakout is imminent

By: Faith Maina
Faith Maina
Faith strives to break down complex developments so investors can make better informed decisions. When Faith is not immersed… read more.
on Nov 24, 2021
  • Corn price has been on an uptrend for several months.
  • Heightened ethanol production and prices have boosted the market.
  • Based on the technicals and fundamentals, corn price is on the verge of a breakout.

Corn price is on an uptrend amid the soaring ethanol prices and production. The formed triangle pattern signals the continuation of the bullish trend.

Ethanol prices

The surge in ethanol production and prices within the United States has boosted corn price. Ethanol production is at a record high after collapsing in 2020. US oil refiners are required to blend the corn-based additive into their fuel. In recent weeks, ethanol plants within the US have been grinding corn at a near record pace.

Are you looking for fast-news, hot-tips and market analysis? Sign-up for the Invezz newsletter, today.

Even with the rising production levels, demand has outpaced supply. As such, ethanol prices have skyrocketed in recent months. The uptrend is comparable to that of natural gas and the broader energy sector. For instance, at the beginning of the year, Iowa production plants were selling the product for $1.39 per gallon. As the economy recovers and drivers hit the road ahead of the holiday season, ethanol prices have soared to $3.17 per gallon. Besides, ethanol futures at the Chicago Board of Trade (CBOT) are trading at $2.20 per gallon.

In the past year, ethanol futures largely traded below the psychological level of $1.50. Indeed, in April 2020, it dropped below $1.00 to a record low of $0.83 per gallon following the decline in fuel demand. In the current year, it has surged by about 36.21%. While it has since dropped from the 7-year high hit in late June, it has remained above the crucial mark of $2.00 that it surpassed in April.

With the ongoing rise in ethanol demand and production, corn price is expected to remain on an uptrend in the short term. Granted, a strong US dollar may curb its upward potential.  

Corn price forecast

CBOT corn futures have remained above the psychologically relevant level of 500 for the better part of 2021. Prior to January 2021, this was an evasive level for the agricultural commodity since May 2014. At the time of writing, corn price was down by 0.04% at 580’2.   

On a four-hour chart, it is trading above the 25 and 50-day exponential moving averages. Besides, it has a triangle as it remains above the ascending trendline. In the near term, it may continue to find resistance along the upper trendline highlighted in red. However, a move above that line will likely be the tart of a breakout. On the downside, it may pull back to along the 25-day EMA at 575’3 before rebounding.

corn price
corn price
Invest in crypto, stocks, ETFs & more in minutes with our preferred broker, eToro
10/10
67% of retail CFD accounts lose money