Corn prices could plunge by 18% if this happens

Corn prices in the spot and futures market continued dropping as concerns about supply and demand continued. Corn was trading at $633.20, which was lower than this month’s high of $673. On the other hand, corn futures at the Chicago Board of Trade dropped to the lowest level in eight months.

China cancels orders

Corn prices have continued dropping in the past few months. It has dropped by more than 24% from the highest point in April last year. This decline is in line with the performance of other soft commodities like soybeans and wheat.

The current phase of the decline is mostly because of a decision by China to cancel corn orders from the United States. The country canceled 327 tons of corn orders from the US, mostly because of the bumper produce in Brazil. A recent report showed that Brazil was set to pass the US as the biggest corn exporter in the world as its production is set to hit over 124 million tons this year.

Meanwhile, another corn news by the USDA showed that the amount of corn inspected at US ports for export dropped from 1.237 million tons in the week ending on 13th April to 913,813. Trends have been a bit weak this year, with the year-to-date exports being 22.3 million tons compared to the previous year’s 34.9 million tons. The most recent WASDE report said:

“ U.S. corn outlook is for reductions to imports and food, seed, and industrial (FSI) use, with unchanged ending stocks. Corn imports are lowered 10 million bushels based on observed trade to date. With supply and use falling by the same amount, ending stocks are unchanged at 1.342 billion bushels.”

Therefore, it seems like corn’s fundamentals are not doing well this year, which could push prices lower. Since corn is a cyclical commodity, prices will likely bounce back later this year or in 2023 as farmers start lowering their production.

Corn prices forecast

Corn chart by TradingView

On the daily chart, we see that corn prices have been in a strong bearish trend in the past few days. This price has moved below the important support level at $637, the lowest point on December 6. It has formed a descending triangle pattern and moved below the 25-day and 50-day exponential moving averages. Corn has moved to the 61.8% Fibonacci Retracement level.

Therefore, corn prices will likely have a bearish breakout as sellers target the key support at $582, which is ~7.90% below the current level. A move below that level will see it crash by 18% to $519, the lowest point on October 2021.