Corn Seen Sliding Below $4.50 on Bear Flag: Technical Analysis

Corn may extend its slump this year to the cheapest level since 2010, according to technical analysis by INTL FCStone Inc.

After the December contract dropped to a then 31-month low of $4.895 a bushel on July 5, prices rebounded to $5.2825 on July 11, creating a so-called bear flag that signals a drop to $4.47, the lowest since September 2010, said Matt Ammermann, a commodity risk manager at FCStone in London. A bear flag, named for its resemblance to an inverted flag on a pole, occurs when a security is falling, pauses and consolidates, and continues its drop.

“The market now is going to be chewing lower, but it’s probably not going to be a drastic drop because yields are still a big question mark in the U.S.,” Ammermann said in a telephone interview yesterday. “Just going by technical support, we’re looking at $4.47, although psychological support would be $4.50.”

Corn futures for December delivery are down 21 percent this year on the Chicago Board of Trade as the U.S. Department of Agriculture expects the country’s farmers to harvest a record 13.95 billion bushels, 29 percent more than the previous year when crops were hurt by drought. Sixty-three percent of the corn crop in main producing states was in good or excellent condition as of July 28, the USDA says. The harvest starts in September.

In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index.

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