Corn grown in the USA has traditionally been used to feed livestock or has been converted into corn syrup and used as a sweetener. No longer solely for eating, corn is increasingly being used in the production of ethanol and it is now considered an "energy commodity."
The price of corn commodities rallied earlier this year, due to many bullish factors. One of the most significant factors is the fact that the global dependence on energy from fossil fuels is continually being challenged. Geopolitical risks in oil-producing countries, conflicting estimates on the sizes of oil reserves, the environmental movement and the farm lobby in the United States have put biofuels in the spotlight-benefiting the grain commodity markets.
Whether you agree with the economics of corn-based ethanol or not, production capacity is being expanded in the United States. Ethanol is heavily promoted by the powerful farm lobby, and is now subsidized by the US Congress. The 2008 re-election campaign figures into this equation heavily as this lobby group represents significant votes in the US.
The growing demand for agricultural commodities, including corn, in the coming years will create an upward pressure on corn prices. In response, farmers this spring have planted the largest corn crop in the US since World War II. This phenomenon has depressed corn prices through much of the spring, as a bumper crop on this much acreage was thought by many traders to be more than enough to meet the "feed and fuel" demand.
The grain markets were very volatile over the recent growing season. As traders try to determine farmers' planting intentions for the coming season, prices could remain jumpy. A further decline in the US Dollar could also inflate prices, as US grains will be less expensive to customers around the world.
Long-term threats to corn prices do exist, despite the increase of demand due to the production of ethanol. Should food inflation get any worse, the cries of consumers may gain the ear of politicians now in the farm lobby's pocket. Subsidies for the ethanol industry could be cut in the future. In addition, tariffs currently preventing sugar or cheaper Brazilian ethanol from entering American markets could be lowered or removed altogether. Many experts agree that sugar-based ethanol is cheaper and more efficient than its corn-based counterpart. Finally, biomass ethanol technology could be perfected, allowing cheaper ethanol production from corn stalks, switch grass or organic waste.
These factors however do not threaten corn in the near-term and in the short-term even a bumper crop will only depress prices so far. Corn commodities may be one drought away from another bull run and remains an interesting commodity to watch over the next few months. Look out for good trading opportunities that may develop for this commodity in the future.
The data and comments provided above are for information purposes only and must not be construed as an indication or guarantee of any kind of what the future performance of the concerned markets will be. While the information in this publication cannot be guaranteed, it was obtained from sources believed to be reliable. Futures and Forex trading involves a substantial risk of loss and is not suitable for all investors. Please carefully consider your financial condition prior to making any investments. MF Global Canada Co. is a member of the CIPF.
About the Author: Jesse Greenwald is an account executive at the Saskatoon office of MF Global. He focuses much of his analysis on the grain and energy commodity markets. In addition, Jesse watches the forex futures, livestock commodities and soft commodities such as sugar, cotton and coffee.
9/19/08
Lines of trends, support and resistance
The trendline. A trendline is a main initial element for the price chart analysis. While the market moves in any direction not along a straight line but along a zigzag, the mutual placement of upper and bottom points of those zigzags permits to plot a line connecting the significant highs (peaks) or the significant lows (troughs) of an appropriate zigzag using technical tools of the computer program.
To draw a trendline only two points are necessary and the third one is the contact point confirmation. On a bullish trend chart it should be drawn using troughs, on a bearish using peaks. The trendline and a line which is about parallel to it and drawn on the opposite side (through peaks on a bullish trend and through troughs on a bearish) form the trade channel. Both lines are then channel's borders.
Lines of support and resistance. The upper and the bottom borders of trade channels are called accordingly support and resistance lines. The peaks represent the price levels at which the selling pressure exceeds the buying pressure. They are known as resistance levels. The troughs, on the other hand, represent the levels at which the selling pressure succumbs to the buying pressure. They are called support levels. In an uptrend, the consecutive support and resistance levels must exceed each other respectively. The reverse is true in a downtrend. Although minor exceptions are acceptable, these failures should be considered as warning signals for trend changing.
The significance of trends is a function of time and volume. The longer the prices bounce off the support and resistance levels, the more significant the trend becomes. Trading volume is also very important, especially at the critical support and resistance levels. When the currency bounces off these levels under heavy volume, the significance of the trend increases.
The importance of support and resistance levels goes beyond their original functions. If these levels are convincingly penetrated, they tend to turn into just the opposite. A firm support level, once it is penetrated on heavy volume, will likely turn into a strong resistance level. Conversely, a strong resistance turns into a firm support after being penetrated. In general, to evaluate the reliability (that is the possibility of a break) of the trade channel borders taking a decision to close or to save an existing position one should govern himself with following rules:
1. A channel is the more reliable the longer it exists. Hence, the solidity of very old channels (e.g. existing more than 1 year) decreased sharply.
2. A channel is the more reliable the more is his width (It takes time to break channel).
3. The resistance may be broken if it is bounced on the background of a growing volume (It takes volume to break resistance).
4. A steep channel is less reliable in compare to a gentle one.
5. The support may be broken independent on the volume (under own weight).
Tomas Anderson is the editor of www.go-see.info - a free Article Directory, where anyone can submit articles or find free content for the website.
To draw a trendline only two points are necessary and the third one is the contact point confirmation. On a bullish trend chart it should be drawn using troughs, on a bearish using peaks. The trendline and a line which is about parallel to it and drawn on the opposite side (through peaks on a bullish trend and through troughs on a bearish) form the trade channel. Both lines are then channel's borders.
Lines of support and resistance. The upper and the bottom borders of trade channels are called accordingly support and resistance lines. The peaks represent the price levels at which the selling pressure exceeds the buying pressure. They are known as resistance levels. The troughs, on the other hand, represent the levels at which the selling pressure succumbs to the buying pressure. They are called support levels. In an uptrend, the consecutive support and resistance levels must exceed each other respectively. The reverse is true in a downtrend. Although minor exceptions are acceptable, these failures should be considered as warning signals for trend changing.
The significance of trends is a function of time and volume. The longer the prices bounce off the support and resistance levels, the more significant the trend becomes. Trading volume is also very important, especially at the critical support and resistance levels. When the currency bounces off these levels under heavy volume, the significance of the trend increases.
The importance of support and resistance levels goes beyond their original functions. If these levels are convincingly penetrated, they tend to turn into just the opposite. A firm support level, once it is penetrated on heavy volume, will likely turn into a strong resistance level. Conversely, a strong resistance turns into a firm support after being penetrated. In general, to evaluate the reliability (that is the possibility of a break) of the trade channel borders taking a decision to close or to save an existing position one should govern himself with following rules:
1. A channel is the more reliable the longer it exists. Hence, the solidity of very old channels (e.g. existing more than 1 year) decreased sharply.
2. A channel is the more reliable the more is his width (It takes time to break channel).
3. The resistance may be broken if it is bounced on the background of a growing volume (It takes volume to break resistance).
4. A steep channel is less reliable in compare to a gentle one.
5. The support may be broken independent on the volume (under own weight).
Tomas Anderson is the editor of www.go-see.info - a free Article Directory, where anyone can submit articles or find free content for the website.
At the Gate of Recession
High yield spreads remain stubbornly high despite dramatic interventions from UK and US central banks. Banks are hording cash due to mistrust and fear over who will make the next big write down. Nationwide, the UK's largest building society, put up the rates on some mortgages despite there being a reasonable probability of a rate cut on the 10th of April.
So after the Easter recovery, it looks as though it's business as usual for the credit crunch. Oil and metals were in demand again as traders reverted back to the buy commodities, sell the dollar tactic that has worked so well over the last 12 months. Consequently, the Dollar sold off heavily against the Euro, as speculation mounted that the Fed is not yet done with cutting rates. Cable was not as lucky, mainly due to speculations that the BOE will be cutting rates at their next meeting.
UK financial companies will be listening to BOE governor King's speech today, for any clues of further direct intervention in the mortgage securities market. They will certainly need it is as credit markets start to freeze over again. We haven't seen volatility in equities like this for half a decade, and the bad news is that were still some way off the frantic action we saw at the height of the dot com bubble. There could be some more explosive action this coming week, with some top tier economic announcements due.
Tuesday brings a raft of manufacturing data, with UK manufacturing PMI in the morning, and US ISM manufacturing index in the afternoon. Midday on Wednesday will be a turbulent time for European traders, with the release of US ADP Non-farm Employment Change, and Fed Chairman Ben Bernanke speaking. Friday tops the bill with the release of Non-farm payroll change and US employment rates.
A long, ugly, deep recession.It was how Chrysler's chief financial officer Jerry York described his outlook for America's economy at a recent gathering of fellow finance executives. A recent poll of financial officers indicates that this isn't an isolated viewpoint. In America, economists with a pessimistic outlook outnumber the positive by a 9-1 margin, while in Europe the margin is 6-1. (via invivoanalytics.com)
After the Easter correction it seems the Dollar collapse is back on track, and March's high of 1.5904 in the EUR/ USD exchange rate could well be breached again this week. A one touch trade with BetOnMarkets.com predicting that the EUR/ USD will touch 1.5855 at any time during the next 16 days could yield 12%.
About Regent Markets Group:
Regent Markets is the world's leading fixed odds financial trading group. Through its main multi-awarding winning websites, BetOnMarkets.com and BetOnMarkets.co.uk, it has established itself as the leading global provider of a unique, powerful way to trade the world's major financial markets. The number, length and variety of trades available to our clients exists nowhere else in the world.
editor@my.regentmarkets.com
Tel: 448003762737
So after the Easter recovery, it looks as though it's business as usual for the credit crunch. Oil and metals were in demand again as traders reverted back to the buy commodities, sell the dollar tactic that has worked so well over the last 12 months. Consequently, the Dollar sold off heavily against the Euro, as speculation mounted that the Fed is not yet done with cutting rates. Cable was not as lucky, mainly due to speculations that the BOE will be cutting rates at their next meeting.
UK financial companies will be listening to BOE governor King's speech today, for any clues of further direct intervention in the mortgage securities market. They will certainly need it is as credit markets start to freeze over again. We haven't seen volatility in equities like this for half a decade, and the bad news is that were still some way off the frantic action we saw at the height of the dot com bubble. There could be some more explosive action this coming week, with some top tier economic announcements due.
Tuesday brings a raft of manufacturing data, with UK manufacturing PMI in the morning, and US ISM manufacturing index in the afternoon. Midday on Wednesday will be a turbulent time for European traders, with the release of US ADP Non-farm Employment Change, and Fed Chairman Ben Bernanke speaking. Friday tops the bill with the release of Non-farm payroll change and US employment rates.
A long, ugly, deep recession.It was how Chrysler's chief financial officer Jerry York described his outlook for America's economy at a recent gathering of fellow finance executives. A recent poll of financial officers indicates that this isn't an isolated viewpoint. In America, economists with a pessimistic outlook outnumber the positive by a 9-1 margin, while in Europe the margin is 6-1. (via invivoanalytics.com)
After the Easter correction it seems the Dollar collapse is back on track, and March's high of 1.5904 in the EUR/ USD exchange rate could well be breached again this week. A one touch trade with BetOnMarkets.com predicting that the EUR/ USD will touch 1.5855 at any time during the next 16 days could yield 12%.
About Regent Markets Group:
Regent Markets is the world's leading fixed odds financial trading group. Through its main multi-awarding winning websites, BetOnMarkets.com and BetOnMarkets.co.uk, it has established itself as the leading global provider of a unique, powerful way to trade the world's major financial markets. The number, length and variety of trades available to our clients exists nowhere else in the world.
editor@my.regentmarkets.com
Tel: 448003762737
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