Corn ETF Takes a Breather, Time to Buy? (CORN)
U.S. corn futures resumed their rally Monday, as a government crop report from last week continued to drive concerns over supplies.
Chicago Board of Trade December corn futures surged 40 1/4 cents, or 7.6%, to $5.68 1/2 a bushel. Despite the jump, the Teucrium Corn Fund ETV (NYSE: CORN), which seeks to track the performance of corn prices, is down 3.4% today, to $35.90.
According to the Wall Street Journal, "The USDA issued sharper-than-expected reductions in estimates for corn and soybean crops and ending stocks for next year, while also saying demand for the commodities remains strong. Corn is the leading the rally as the USDA lowered projected 2010-11 ending corn supplies below 1 billion bushels and projected stocks as a percentage of usage at a 15-year low."
A Bloomberg report this afternoon noted that Chinese demand for corn may force the country to seek outside producers.
The WSJ notes that "In the short term, traders and analysts are watching to see what level prices must reach for a pullback in corn demand to offset tight supplies. Several traders and analysts said demand should begin to ebb at around $6 a bushel, but Friday's report has also prompted forecasts that prices could climb even higher."
"Corn will not be rationed at $5 a bushel, nor at $6, but may require $7 a bushel or more," market analyst Dennis Gartman said in a note to clients Monday.
It appears that for the near-term, demand for corn will remain strong, while supply may be limited. These conditions may translate to a further jump in corn prices, and investors would be advised to keep an eye on CORN.
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